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LR2 tanker freight rates fall to $28.75/mt as charterers favor smaller vessels

London — Freight rates to carry an 80,000 mt clean petroleum product cargo from the Mediterranean to Asia Pacific dropped to a 10-week low of $28.75/mt on Tuesday, a lumpsum equivalent of $2.3 million, as delays through the Turkish Straits for larger vessels prompt charterers to seek smaller tankers.

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Rates on the Mediterranean to Japan route, a typical voyage for naphtha cargoes, have dropped 18% from an all-time high of $35/mt ($2.8 million lumpsum equivalent) on December 20.

Related podcast: Baltic Sea Handysize tanker rates at record highs

Delays for passage of vessels more than 200m long in the Turkish Straits -- of 19 days northbound and 18 days southbound as of Tuesday -- have led to charterers favoring medium range tankers to carry cargoes to Japan. Charterers have placed three such vessels on subjects since the beginning of the week.

Being less than 200m long, medium range tankers do not face the same delays. An MR tanker taking a 37,000 mt cargo was on subjects at a lumpsum of $1.55 million at the beginning of the week.

Long range tankers in the Mediterranean are facing difficulties meeting agreed laycans with charterers if loading cargoes in the Black Sea, and so stay open in the Mediterranean longer. This has led to increased availability of long range tankers in the Mediterranean, weighing on rates.

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Shipowners remain optimistic, however, saying the market is still relatively strong.

"There is a general weakening across categories of vessel sizes which is why it is going down, but I believe it is quite strong and nothing to worry about," a Mediterranean-focused shipowner said.

-- Arthur Richier, arthur.richier@spglobal.com

-- Edited by James Burgess, james.burgess@spglobal.com