Clean Medium Range (MR) freight rates from northeast Asia slipped on reduced chartering activities and lower bunker costs.
Argus-assessed MR lumpsum rates for 35,000t shipments from South Korea to Singapore and to the US west coast (USWC) fell by 9.4pc and 3.9pc to $915,000 and $2.45mn, respectively, on 22 September, from $1.01mn and $2.55mn on 18 August. Freight rates for MR shipments from South Korea to Australia fell by 2.9pc to Worldscale (WS) 250 from WS257.5 over the same period.
Trades have been relatively muted, as many participants were absent from the market because of Chinese state-owned shipowner Cosco Shipping's annual partner convention in Shanghai, an international LNG shipping forum in Shanghai, and Japan's Autumnal Equinox holiday on 23 September.
This led spot MR vessel availabilities to rise to about 12 over a 10-day period from 22 September, from about 4 on 14 September, a participant said.
There were no cargoes recorded by Argus between the 18-22 September reporting period. But this might not be an accurate representation of the market, a shipbroker said, as some charterers may have chosen to negotiate their requirements privately. This could lead to deals being concluded, but details may not emerge, as these fixtures would be done directly between charterers and shipowners. Another reason behind the lack of visible spot cargoes could also be charterers' attempts to dampen freight rates, after rates rose following China's third export quota announcement on 1 September. There were a total of at least 40 market cargoes recorded by Argus between the 11-15 September reporting period.
Freight rates also decreased in response to falling bunker fuel prices. Argus-assessed prices for very-low sulphur bunker fuel oil with 0.5pc sulphur content in South Korea fell to $622/t on 22 September, down by $63/t from $685/t on 15 September.
Freight rates are likely to come under pressure in the short term, as many participants will also be away ahead of this week's South Korea's Chuseok holiday over 28-30 September, and China's Golden Week holidays from 29 September to 6 October.
But freight rates in the mid-term could be supported by China's clean petroleum exports. Fuel demand from China's construction sector has fallen short of expectations this month. As a result, Chinese oil companies are raising diesel exports to alleviate domestic oversupply. China is on course to raise diesel exports to 290,000 b/d from the originally planned 260,000 b/d.
Chinese state firms are likely to boost total September clean product exports to 940,000 b/d from the originally planned 890,000 b/d after securing the third batch of export quotas, according to refinery sources. Refiners may also swap some low-sulphur fuel oil export quotas for clean products quotas this month to capture better margins for the latter, an official from a state-controlled refinery said.
There were also market discussions about the possibility of more export quotas from China, said a Singapore-based gasoline trader. There were discussions around the Chinese government issuing another 800,000t of clean product export quotas, and some transfer of fuel oil quotas to clean products.
