London — Freight rates for Handysize vessels -- the most widely used class to carry fuel oil and feedstocks in the European region -- have rallied to a four-year high in the Black Sea as tonnage has tightened significantly due to increasing delays in the Turkish Straits.
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The Black Sea-Mediterranean route for 30,000 mt cargoes was assessed Tuesday at Worldscale w315, equivalent to $28.63/mt, the highest level since February 13, 2014, S&P Global Platts data showed.
Turkish Straits delays are up to three to four days now on vessels under 200 meters long and this is holding up a lot of tonnage at a time when the position list is already tight.
It also forces charters to work cargoes much further ahead than they normally would in order to guarantee vessels can make the berth on time, sources said.
Generally delays are no more than one to two days on Handysize vessels.
The Mediterranean fuel oil market has now retained some length this month, following a tight early fourth quarter. Cargoes are available to be shifted for December dates so the delays have not yet hit the market, but if they persist it could cause a headache for deliveries. The west Mediterranean, the main demand centre for high sulfur fuel oil as a bunker fuel in the region, is not tight but buying interest persists.
Softer Singapore premiums have closed the once highly active Suezmax arbitrage to the East this month, keeping more fuel oil parcels in the region.
The feedstocks market has also been hit by the increase in Black Sea-Med freight rates as vacuum gasoil, a fuel oil feedstock, is exported through two key regions, the Baltic Sea and the Black Sea, although occasional cargoes can come from elsewhere.
"Freight has gone crazy," a feedstocks trader said Wednesday. "Seems like term holders are taking the hit there as they can't pass on the freight cost."
Traders loading vacuum gasoil cargoes from the Black Sea would incur higher delivery costs as a result of the increased Black Sea-Med CIF/FOB spread, last assessed at $2.72/b Tuesday, up from $2.16/b at the start of the week. It was assessed at $1.80/b a year ago.
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