Shipowners have started to switch their clean tankers to carry fuel oil cargoes from the Black Sea as rates for dirty cargoes have soared.
The Black Sea to Mediterranean rate for a Handysize tanker carrying fuel oil has climbed to $25.03/t, compared with just $14.78/t for a Black Sea to Mediterranean clean products cargo.
The rapid gains have led shipowners D'Amico and Maersk to switch the Cielo di New York and Maersk Aegean to carrying fuel oil instead of their typical clean products.
A supply imbalance has developed recently in the dirty Handysize market, between the north and south of Europe. The Baltic to UK Continent fuel oil rate picked up rapidly (see table) in October and early November, drawing vessels north, with the number of ships booked to carry fuel oil from the Black Sea to northwest Europe also increasing. This created a shortfall in ships in the south.
This coincided with a rise in export volumes from the Black Sea, which are already 1.11mn t so far this month — on track for 1.86mn t for the whole month — up from 1.53mn in the full month of October. The biggest gains are in trans-Black Sea voyages (see table) with four ships already sailing this month compared with just one the previous month.
A possible note of caution for shipowners is that volumes from the Black Sea to north Europe have dropped this month as demand in the north softens. The pick up in ships sailing to northern Europe in October helped to create the current tightness in the south, whereas any vessels booked on trans-Black Sea or Mediterranean voyages will open again in the same region. This could mean that the current spike in rates might be short-lived, particularly with clean tankers now switching into the market.
Clean tanker owners often do not make the switch to the dirty tanker market even when rates in the latter are higher, mainly because of the cost of switching back. Shipowners typically pay $50,000, and lose several days of potential revenues, to have a vessel cleaned. On top of that, most charterers will expect a discount for at least the next 2-3 voyages of around WS5 points — 50¢/t on a Black Sea to Mediterranean market — to compensate for the risk of their cargo being potentially contaminated. On top of this, jet fuel charterers in particular might be even more cautious of the risk of contamination and refrain from using the vessel for several months. But the current $10.25/t premium for dirty cargoes on the Black Sea route is more than enough to compensate for this.
| Destinations of Black Sea, Mediterranean Dirty Handysize Shipments | tonnes | |||
| Mediterranean | Black Sea | North Europe and Baltic | Other | |
| Aug | 1,167,587 | 0 | 98,106 | 33,346 |
| Sep | 1,090,639 | 0 | 118,691 | 98,358 |
| Oct | 1,288,202 | 28,969 | 163,619 | 49,151 |
| Nov* | 706,572 | 126,735 | 33,662 | 247,069 |
| Total | 4,253,000 | 155,704 | 414,078 | 427,924 |
| *= November data 1-18 of the month | ||||
| Vortexa | ||||
| Handysize fuel oil and clean rates, monthly average | $/t | |||||
| Black Sea to Med | Cross-Med | Baltic to UKC | Black Sea to Med | Cross-Med | Baltic to UKC | |
| Dirty | Clean | |||||
| Aug | 11.86 | 7.31 | 12.43 | 11.94 | 7.57 | 10.46 |
| Sep | 11.66 | 7.18 | 11.47 | 11.91 | 7.53 | 10.02 |
| Oct | 13.61 | 8.48 | 13.36 | 15.23 | 9.46 | 10.83 |
| Nov | 18.08 | 11.46 | 16.71 | 15.46 | 9.65 | 11.54 |
| Argus | ||||||
