Shipowner Hafnia Tankers said that the oil product and associated tanker markets are in a "rebalancing mode", with inventories diminishing, the number of long-haul sailings being diverted slowing and several refineries looking to increase production.
The company noted that this sort of situation has historically resulted in weaker freight rates, because demand is met by storage drawdowns rather than by new cargoes.
Tankers that were being used to store products have started moving to regions where demand is recovering, Hafnia said. Jet fuel and diesel cargoes are still being stored at sea, but gasoline and naphtha have had quicker turnaround times, it said.
Shipowners that secured cargoes for their tankers when freight rates reached historic highs in late-March and in April have enjoyed demurrage rates — payment for failure to discharge within the allotted time — of as high as $100,000/d for Long Range 1 (LR1) and Long Range 2 (LR2) tankers and around $40,000/d for Medium Range (MR) tankers. But waiting times outside ports have started to ease.
The frequency of Mideast Gulf to Europe cargoes being diverted around the Cape of Good Hope — a strategy that charterers use to delay delivery — has declined, although this is in part because the overall amount being moved has also slowed, Hafnia said.
Hafnia said that refinery production could accelerate as storage drawdowns increase and said it is this, rather than a return of demand, that is likely to drive any recovery in freight rates. But stocks will first need to be worked through, and the timing of this will be governed by oil product demand.
As an example Hafnia said that refiners in South Africa have been restarting plants, but a quick increase in demand there meant the need for additional imports. This could explain an increasing number of clean and dirty oil product cargoes, either destined to South Africa or with options to discharge there, in the spot market this week.
Hafnia said that as tanker resale values are only slightly above the five-year average, this shows that the historic freight rate increases in the past six months were driven by commodity markets rather than long term tanker market fundamentals. It said seaborne demand will be lower this year than last year, but this will be partially offset by the number of tankers taken out of the spot market for use as floating storage and by an historically low tanker orderbook. For 2021, Hafnia expects tonne-mile growth to outpace fleet growth, which will lead to tanker supply/demand fundamentals tightening.
Hafnia made a profit of $77.1mn in the first quarter, compared with $27.9mn in the same period last year. Its time charter equivalent (TCE) revenues rose to $193.5mn from $132.6mn, its average daily TCE was $22,430/d and its average operating expenses were $6,833/d.
Hafnia has covered 70pc of its capacity for the second quarter at $28,921/d and 16pc of its capacity in the second half of the year at $21,347/d. It has covered 48pc of its 2021 capacity for its six LR2s at $26,739/d.
Hafnia operates 178 product tankers through a pool structure. It owns 88 of these.
