Medium Range tankers freight rates for the Northwest Europe to US Atlantic Coast route, basis 37,000 mt, have risen by a steep Worldscale 20 in the last two days due to the outage on Colonial Pipeline’s lines 1 and 2, and more demand from Brazil and China, shipping sources said Wednesday.

According to S&P Global Platts data, rates on the NWE-USAC route rose by w20 ($2.86/mt) since Monday to be assessed at w90 ($12.86/mt) Tuesday to a high last hit on August 30.

In the previous week, the freight rates were assessed at w70 ($10/mt) due to ample tonnage and weak demand for products. In addition to that, freight rates on the US Gulf Coast to NWE, route basis 37,000 mt, were trading at break-even levels of w55-60, therefore not many ship-owners were willing to move the US.

However, the scenario had flipped due to the Colonial outage prompting more demand for gasoline in the US from Europe.

“Tonnage is starting to become scarce for the remaining September dates leaving owners increasingly bullish with rates ideas. The market seems to find itself in a standoff between the available cargoes and remaining owners but there is real potential so see rate climb higher than w90. A handful of WAF. Brazil and China stems help to back up this market however the Colonial Pipeline in the States is expected to come back online from tomorrow [Wednesday] which may take some of the heat out of the market,” a shipbroker said.

The Colonial Pipeline has been out since September 9, when a leak was discovered in line 1 and 2 of the pipeline in Alabama.

Lines 1 and 2 run from Pasadena, Texas, to Greensboro, North Carolina, carrying 1.37 million b/d of gasoline and 1.16 million b/d of distillates, respectively.

The line sends gasoline from the structurally long US Gulf Coast to the structurally short Atlantic coast, providing a cheap means of sending gasoline and other refined products. The Jones act, which states that US-flagged vessels must be used in the shipment of products within the US, has elevated prices on such vessels, meaning the pipeline is the primary means by which gasoline moves from the Gulf to Atlantic coasts.

With the pipeline out sellers from NWE can take advantage of cheaper freight compared to the US flagged vessels to cover shorts into the US Atlantic coast.

In a notice to shippers, Tuesday, Colonial said work was being completed on a temporary bypass line to restart its gasoline-only Line 1 Wednesday, around the damaged section of the pipeline in Alabama.

Source: Platts