INTERVIEW: Heidmar CEO sees product tanker freight lag refining margins

Product tanker freight rates have drifted from strong refining margins as a near-total collapse in Persian Gulf refined product flows overwhelms any ton-mile benefit from supply diversification, Heidmar Maritime Holdings Corp. CEO Pankaj Khanna has told Platts.

With the product tanker fleet potentially expanding 30% and limited scrapping expected, the imbalance could weigh on freight markets through the end of the decade, even as crude tanker markets remain more resilient, Pankaj Khanna said Sept. 15 on the sidelines of the 18th Annual Capital Link Shipping & Marine Services Forum in London.

Persian Gulf refined product export flows that once reached about 5 million barrels/day have fallen to near zero, Khanna said.

"Ton-miles cannot replace the volume when you have 5 million barrels of the trade dropping off," he said.

Exports of refined products from the Persian Gulf in 2025 were 4.1 million b/d and in August they were 2 million b/d, according to data from S&P Global Commodities at Sea.

Amid this, refining margins have soared. Platts assessed the Forties Northwest Europe Cracking Netback Margin at $32.18/b Sept. 15, up 166% from Feb. 27, before the start of the US and Israel war with Iran started, and 149% above the five-year average.

Platts is part of S&P Global Energy.

Global refining margins remain strong due to insufficient economically available spare refinery capacity and rising product prices to high levels, analysts at S&P Global CERA said Sept. 1. Refining capacity additions are set to be about 1 million b/d in 2026, and 150,000 b/d in 2027. Further refinery rationalization is currently unlikely, the analysts said.

Crude tanker flows have proven more resilient, with Saudi flows through the Yanbu pipeline corridor and the Strait of Hormuz keeping barrels moving in August, supported by strategic stock releases from China, Japan and the US, Khanna said. Vessels are also chasing Atlantic cargoes.

Crude exports fell from 17.5 million b/d in 2025 to 11.2 million b/d in August, CAS data showed.

The Platts global clean tanker index for non-scrubber-fitted and non-eco vessels was $80,965/d Sept. 15, up 112% from Feb. 27, before the start of the war. The equivalent dirty tanker index for non-scrubber-fitted, non-eco vessels was $649,751/d Sept. 15, up 301% from Feb. 27.

Fleet absorption

The product tanker order book represents a potential 30% increase in fleet capacity, but Khanna said ton-mile expansion alone cannot absorb that growth, Khanna said.

"If there is no scrapping whatsoever and the fleet increases by 30%, there's no way that the 30% can be absorbed by ton-mile growth," he said.

The heaviest newbuild tranches arrive in 2028 and 2029, with some bookings extending to 2030, providing a near-term buffer; however, current trade volumes are already under pressure, with a "massive decline in volume right now," Khanna said. Even if volumes recover and supply diversification accelerates across Canada, Guyana, Brazil and the US Gulf Coast, the market could absorb only an 8% to 10% improvement in the ton-mile picture — far short of a 30% fleet increase, he said.

Canadian crude displacing US imports does not automatically generate net new seaborne volumes, Khanna said.

"It's not all additional oil until there's production growth," he said.

If Strait of Hormuz disruptions ease within the fourth quarter, crude tanker ship demand is forecast to fall 10.5% to 12.5% in 2026 but grow 17%-19.5% in 2027, shipping association BIMCO has said. Product tanker demand is expected to be broadly flat in 2026, ranging from a 2% decline to no change, assuming the Strait of Hormuz fully reopens in the fourth quarter, before rising 2.5%-4.5% in 2027, the group said.

The crude tanker fleet will expand 9.6% between the end of 2025 and 2027, with the orderbook-to-fleet ratio climbing to 28%, the highest on record, dominated by VLCCs, BIMCO said. The product tanker fleet is expected to grow 13% over the same period, with LR2 ships making up more than half of the tonnage on order.

Freight versus margins

On scrapping, sanctions regulations have effectively frozen demolition of shadow fleet vessels.

"Until there is a UN resolution or a G20 resolution which says shadow fleet vessels can be scrapped, there will be no [significant] scrapping," Khanna said.

The compliance burden has also reshaped operations; Heidmar now employs three lawyers running continuous sanctions and know-your-customer checks, compared with one before the Russia-Ukraine conflict.

Looking ahead, supply diversification trends favor Suezmaxes and VLCCs on long-haul crude routes, while product tanker demand remains structurally dependent on countries — such as Australia — that have dismantled domestic refining capacity, Khanna said.