The medium range (MR) tanker market in the North Asia has firmed this week, with rates recovering from last month’s lowest levels in 2016 as charterers rushed to fix an influx of fresh cargoes before the holiday season. Rates for the key South Korea-Japan route grew by $20,000 w-o-w to $290,000 while rates for the key South Korea-Singapore route jumped by $75,000 w-o-w to $380,000. Rates for the key Singapore-Japan route basis 30kt were up by w17.5 points w-o-w to w125 points. Robust winter heating demand, increasing Chinese product exports as well as weather delays lent support to MR rates.
Strong regional winter heating demand in response to the La Nina weather conditions has contributed to the spike in MR freight rates. An earlier-than-usual winter in Japan has led to increased demand for kerosene which is widely used as a heating fuel. Japanese refiners typically import the heating fuel from South Korea where they lease storage. Japan’s kerosene stocks stood at 13.67 mmb in the week ending December 10, down 3 percent from the previous week.
More cargoes loading out of North China (mostly Dalian) also helped to boost MR rates. Chinese refiners typically ramp up product exports in December as they try to use up their leftover quotas for the year. Total Chinese fuel exports hit a new record high of 1.19 mmb/d in November, up by 18.3 percent y-o-y. Weather delays in North Asian ports have also led to congestion, tightening the tonnage list.
The Author
Rachel Yew is a Singapore based commodity and freight research analyst at Ocean Freight Exchange.