A surge in the availability of middle distillate and naphtha cargoes as well as a lack of resupply of tonnage from the west helped push the rate on the benchmark Long Range II Persian Gulf-Japan rate to a 2012 high.
The benchmark Persian Gulf-Japan rate to move a 75,000 mt cargo on an LR2 was assessed at Worldscale 120 points Monday, surpassing the previous 2012 high of w110 on October 18.
The LR2 freight level pushed up with South Korean charterer Daelim widely reported to have placed the Cape Endeavor for a Persian Gulf to Japan voyage, loading December 7, at w120.
Daelim was not immediately available to confirm this fixture.
"I am surprised that the market has gone up so much so quickly. We have not even [reached the] mid-month of November [and] the position list for the first half of December is very good from the owners' point of view," a source with an LR2 ship-owning company said.
"What we need to see is that the activity [levels] in the West market continues. That will tighten the position."
Market participants said the Asian LR2 market was being supported due to tonnage tightness caused by few vessels coming from the West market to the Persian Gulf market for fresh employment.
"The tonnage that is opening in the West of Suez has found cargoes in the Atlantic and thus none [of them are] coming back to the Persian Gulf," a second source with an LR2 ship-owning company said.
"Also, the Aframax newbuildings have not been around in the [market for the] past 30-45 days," said the source. "Thus charterers had to look at the LR2 tonnage [to move their middle distillate cargoes]."
According to market watchers, the entry of newbuild Aframax vessels, which are similar to the LR2 vessels except that they lack epoxy coating on their tanks, have been snatching away middle distillate cargoes that would have typically gone to the LR2 vessels.
Usually, middle distillate cargoes are moved on ships that have epoxy coated tanks. Since newly-built ships have very clean tank, they move middle distillates as their virgin cargoes.
"There is a lack of suitable ships coupled with the increase in cargoes [going] both to the East and West [from the Persian Gulf]," a clean shipbroker said about the LR2 market.
Another factor that has helped the LR2 market is the good activity level seen in the Long Range I and Medium Range simultaneously.
"The MR, LR1 and LR2 segments been active at the same time. Thus charterers have not had the possibility to upsize or downsize or even use it as a threat [to take away cargoes from the LR2s to the other segments]," the second source with an LR2 ship-owning company said.
Source: Platts