Thinking Outside the Triangle (April 17, 2014)
Although US refined products exports largely underpin medium-range (MR) product tanker demand in the Atlantic Basin, there is little evidence of similar stability in US Gulf – UK Continent (TC14) freight rates. In many of the crude oil trades, high demand for crude oil in a particular market leads to high demand for ships and, often, robust freight rates. Because the Atlantic Basin refined product market is short-haul in nature and driven by traders’ arbitrage activities, it is far more fickle. Teasing out trends in the to and fro trades between the US and Europe can be quite challenging, as product prices, freight rates and where the cargo ultimately ends up are highly interdependent. For shipowners, the ability to secure cargoes and get paid roundtrip freight in both directions is an attractive proposition, yet one that is without guarantee. Furthermore, the seemingly inverse relationship in freight rates between the two benchmark transatlantic trades may highlight just how savvy charterers have become.