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A boost for product tanker rates

A boost for product tanker rates
The products market got a boost last week when Gulf rates to Japan lifted significantly as LR2 earnings on the route rose 32% to $18,116 a day and LR1 earnings 37% to $23,025 a day, according to Clarkson Research figures, beating last year's top levels.  

MR rates on many routes also improved though the Caribbean took a drop. Analysts started saying last year that the products market offered better, or quicker, prospects for recovery than the crude market but there had been few signs of it until the end of the year. Indeed one leading MR operator returned to profit in the last quarter after 14 consecutive quarters of losses.

Another owner making a spectacular bet on this market, Scorpio Tankers, has actually ordered a staggering 24 product carriers this year on top of an already large orderbook it has in the sector.

Fleet growth is expected to be negligible this year in the LR sector. Although a considerable number of MRs are due to deliver this year, as a percentage of a near 900-strong fleet of larger MRs it is still a more comfortable situation than the expansion in the large crude carrier fleets.

Underpinning hopes for the products market is the switch in refinery capacity towards the East. Almost all new refinery capacity is in non-OECD Asia - an additional 1m barrels was added last year. While closures and maintenance have reduced capacity in the west. Australia is to shut a third of its refinery capacity. The US, from being number one importer of products has gone to second biggest exporter. The resulting changes in trade patterns of these and other developments, are supporting a rate of product demand expansion that is felt to exceed potential fleet growth assuming owners don't go mad in the shipyards in the next couple of years.