eMissions Control

The shipping markets are no stranger to emissions control areas (ECAs), following the establishment of ECAs in the United States, Baltic and Northern Europe. From the 1st of May 2025, the entire Mediterranean Sea will become an ECA, with the maximum sulphur content of fuel burned on board falling from 0.5% to 0.1%, unless fitted with an exhaust gas cleaning system (scrubber) capable of reducing stack emissions to this level. Following previous ECA introductions and IMO2020, refineries and bunker suppliers have shown they can adapt to the necessary changes in demand, however, there will be implications, both in terms of bunker prices and commodity flows in and out of the region.

Current bunker demand in the Mediterranean is estimated at around 21.5 million tonnes, with >50% consisting of 0.5% VLSFO. Come May next year, demand for VLSFO in the region is expected to fall, with ships that do stem the grade doing so to burn once outside the ECA. According to data from Marine and Energy Consulting Ltd, demand for VLSFO could fall to around 6 million tonnes/year, shifting to 0.1% MGO and ULSFO. In theory, HSFO demand should remain steady as ships fitted with scrubbers continue to burn high sulphur grades. However, with some scrubber systems unable to “scrub down” HSFO to 0.1%, it remains to be seen how many Owners will be forced to switch to other grades.

Ships trading in the region will therefore face higher costs, unless they are using a scrubber. For the year to date in Gibraltar, 0.1% MGO has averaged $798/tonne vs. $590/tonne for VLSFO (+35%) which should translate into higher freight rates, and for tankers, likely higher Worldscale flat rates in due course.

The ECA also has implications for the flow of refined products within, in and out of the region. A decline in demand for VLSFO is inevitable, which should facilitate export arbitrages from the region, most likely to East of Suez. At the same time, the Mediterranean should see its structural deficit of gasoil increase, with cargoes being imported from the US and Middle East. Trading of compliant grades across the region should also get a boost, at the expense of movements of VLSFO cargoes.

Overall, this suggests a modest shift from dirty to clean tankers for regional moves, although larger dirty tankers are likely to see some benefit from exporting surplus fuel oil to Asia. Bunker demand in the region will also be impacted (albeit to a lesser degree) by the upcoming FuelEU legislation which mandates a 2% reduction in the greenhouse gas intensity (GHG) from 1st of January 2025. Whilst the initial impact will be small, some demand will be shifted from conventional bunker fuels to greener alternatives.



Gibraltar Bunker Prices ($/tonne)

Crude Oil

East

A slow week in the AG region for VLCCs as the remaining October cargoes were covered. Due to the lack of activity/healthy supply of tonnage Charterers were able to find an opportunity to put pressure on freight levels which led to an easing after they had sat steady for much of the week. Looking forward into next week Owners will be hoping to see a flurry of activity for 1st decade November. Charterers should however be able to pick tonnage off as there is a decent overhang.  Today we are calling AG/China in the region of WS55 and 280 Ag to USG fetches WS37 via Cape.

In Suezmax markets in the East Charterers will be looking to break 140 x WS70 via C/C next week but don’t be surprised if more gets done for fixtures with options. Rates to head East have softened slightly to around 130 x WS115 and next week it seems likely that we will see some VLCCS start to come into play taking part-cargoes.

Despite the AG Aframax market remaining relatively inactive, sentiment has firmed due to rising tensions in the region. Rates are pushing upwards with AG/East now assessed at 80 x WS150, however, we are yet to see a straight run achieved at this level. After a clear out at the front end of the list, Owners finish the week with a more positive outlook than when it started.

West Africa

Freight rates in this sector have remained on a steady course this week, although there has been a lack of on the surface enquiry. Questions/fixing being done off market still provides the region with some strength but with levels in the surrounding regions easing, the chances are WAF will follow suit if the activity is not there to support current levels. We expect this more positive outlook to continue into next week and today we expect 260 WAF/China to fix in the region of WS61 level.

Suezmax markets in West Africa are firm, with an uptick in the USG off the back of some delays. For TD20 today, we estimate rates to be around WS95. Though on the early side, tonnage remains tight and the option of cargoes from the Americas remains, which will likely pull a few ships across the Atlantic.

Mediterranean

TD6 remains relatively untested but with rates in West Africa still making sense from East Med open positions, we feel rates are around 135 x WS97.5. Libya/East remains relatively flat at around $4.6M, with a few putting their hands up for this run.

The Mediterranean Aframax market has gone from strength to strength this week off the back of increased Libyan activity, a warm States market and replacement cargos. The recent political solution in Libya saw some early cargoes worked and this allowed Owners to push for higher for other runs. Ceyhan voyages crept up to WS155 levels with small discounts available in particular cases but Libyan fixtures rose to WS190 and WS200 levels in tricky cases. CPC was fixed at WS160 but in theory the next done should be much higher. In the main now Suezmaxes are in play despite also firming and they will limit further growth. But for cargoes still needing Aframax-only tonnage, the going remains firm.

US Gulf/Latin America

VLCC rates from USG have weakened on the back of a lull in activity as well as some failings for TD22 runs. Tonnage remains on the tighter side and with potential weather delays for ships opening up in the UKCM region, the feeling is that the Atlantic basin remains the most exposed position to see further upward gains. The Brazil export market has seen little action so far, with fixtures being reported in dribs and drabs. Today we expect a USG/China cargo to pay in the region of $8.4m and a Brazil/China run is around WS60 level.

Aframaxes for TD25 corrected themselves after the fast run-up from the prior week, losing about half of their gains. The list remains healthy with some ballasters, despite the firming in the Med. Would expect a sideways push to start off next week until we can judge enquiry.

North Sea

Despite turbulence in surrounding regions the North Sea Aframax market plugs along in its standard steady fashion with WS122.5 being repeated as the benchmark. We can expect a little more action with the refineries coming back online but in reality, any growth will be slow and steady.

Crude Tanker Spot Rates (WS)

Clean Products

East

Steady activity for the LR2s in the East and the tonnage list has started to clear out. However, there remains tonnage for both East and West stems and as such, rates hold flat for now. TC1 is at 75 x WS115-117.5 and Jet West at $4.1-4.2m levels. The LR1s have been quietly busy and as a result the list has seen a good proportion of prompt tonnage removed. This is still a work in progress and accordingly rates have been negatively tested, though with another week of consistent activity Owners could start to see an upside. For now, TC5 is at 55 x WS120-125 and West at $3.5m levels.

Firming of the MRs in the AG continued this week with sustained activity and flow of cargoes seeing some WS50 points added to TC17. This run as well as localised xAG runs have been the main driver for the clear down in tonnage, with only a handful of older/less well approved units now left in the next 7–8 day window. As Charterers start to reach forward on dates to secure ballasters, the expectation is for this firming trend to continue into next week. TC12 is due a test, with expectation of WS150-160 next and westbound numbers to follow suit.

Mediterranean

All in all, it’s been a busy week for the Handies here in the Mediterranean, which has helped clear out the armada of tonnage we saw on our lists last week and as a result has seen rates firm. 30 x WS95 was the call for xMed on Monday morning, but thanks to a big influx of cargoes early on the list tightened and we soon saw rates push to 30 x WS112.5 by midweek. Fast-forward to the present and we see last done vanilla xMed at 30 x WS125, with 30 x WS145 also achieved for a cabotage run. Heading into the weekend and the list remaining tight for well-approved tonnage, expect positivity to continue from Owners come Monday. 

Finally, to the Med MRs, where it has been a positive week with good enquiry levels and rates able to kick on. We began the week with Med/TA trading at 37 x WS85 but thanks to some improved enquiry including a few Nap stems rates, rates have now firmed up to around the 37 x WS105 levels. WAF is in need of a fresh test off the back of this, with the 20-point premium expected to remain intact. A couple of stems remain looking for cover as we approach the weekend, but with TC2 still stuck at 37 x WS90 don’t expect many more gains in the Med just yet. 

UK Continent 

Another rather uninspiring week comes to an end here in the UKC MR sector with rates continuing to drag along the floor with TC2 around 37 x WS90. This, however, has become the backhaul run with the USG market spiking as we see a number of vessels opening in WAF, the Med and even some in the UKC set their AIS to USG. This partnered with a good level of xUKC and UKC/Med Handy stems, has kept tonnage on the move, clearing out our lists, but we still must be wary of a good number of TC14 vessels heading our way. WAF has certainly become the unpopular route and with returns so low, we see the traditional 20-point premium increase heavily to give incentive to Owners to fix. On paper a relatively good week in terms of list turnover, but unlikely to cause much positivity in the near future as we expect a good restocking over the weekend. 

A positive week draws to a close for Handy Owners in the North as an increase of ULSD stems for xUKC and UMS moving down to the Med has been seen. The Handy tonnage list has been tight for promptish dates throughout and with limited re-supply coming, Charterers have had to lean on the slower MR market in order to find alternatives. Come Friday we have a new high on subs down to the Med (30 x WS137.5 +5 Libya) and a fresh positive test expected for xUKC. Moving forward, there has been a good amount of MRs fixed short and unless long-haul enquiry (TC2/WAF) picks up, expect these ships to once again be competing on 30kt clips.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

It’s been a slow week for Handies in the North. The list started out looking rather lean, however, unfortunately for Owners, enquiry was sluggish to surface leaving Owners unable to capitalise. The equivalent of 30 x WS217.5 for an unusual cargo caused a bit of a stir when details broke to the market on Thursday. We feel that for a ‘vanilla’ x-UKC levels still sit at the WS 197.5-200 mark, where it has stayed all week as more naturally positioned tonnage now begins to populate the list. 

The Med saw an encouraging start to the week, with a consistent level of activity beginning to clear built-up tonnage. Levels gradually firmed from WS167.5 to around the WS170 by the week’s end. At first glance, the list still looks lengthy but well approved ships are somewhat thin and tonnage at the top of the list is bunched East Med where Owners will need to hold their ground. A quiet end to the week has put a bit of a dampener on Owners’ spirits and we expect to see levels hold heading into next week.

MR

A lack of full-stem opportunities is the story for MR Owners across both regions this week as enquiry has stayed buried. Part-cargoes have once again been the main source of employment in the Med as early into the week units were clipped away. However, by week’s end, enquiry slowed leaving options for prompt coverage basis East Med if needed. In the North, units are thin leaving some planning ahead required for Charterers, although the allure of an elusive full-stem cargo should help to keep levels in around last done.

Panamax

Another quiet week for Panamaxes with little to report in the European market. Owners continue to ballast straight back to the USG, where employment is more consistent. A fresh test is needed to determine levels although the appeal of a laden trip TA should keep levels more in line with market expectations of the WS130 mark. In the USG, steady surrounding markets coupled with a general lack of disruption from Hurricane Milton has kept rates fairly flat for Panamaxes, with levels currently sitting around the 50 x WS140-145 range with little change here in sight for now.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

Clean and Dirty Tanker Spot Market Developments – Spot WS and $/day TCE (a)

wk on wk changeOct 10thOct 3rdLast Month*FFA Q4
TD3C VLCC AG-China WS058585466
TD3C VLCC AG-China TCE $/day-2,00036,50038,50033,50041,500
TD20 Suezmax WAF-UKC WS-148910378104
TD20 Suezmax WAF-UKC TCE $/day-10,25031,75042,00027,75037,000
TD25 Aframax USG-UKC WS-45175220118181
TD25 Aframax USG-UKC TCE $/day-17,75043,25061,00024,25041,750
TC1 LR2 AG-Japan WS-5116120126 
TC1 LR2 AG-Japan TCE $/day-3,25021,25024,50026,250
TC18 MR USG-Brazil WS34270236185213
TC18 MR USG-Brazil TCE $/day6,00038,75032,75023,00024,750
TC5 LR1 AG-Japan WS-22125147149155
TC5 LR1 AG-Japan TCE $/day-6,75015,25022,00022,50020,750
TC7 MR Singapore-EC Aus WS-6181187177211
TC7 MR Singapore-EC Aus TCE $/day-2,00017,25019,25017,25019,750

(a) based on round voyage economics at ‘market’ speed, eco, non-scrubber basis

Bunker Prices ($/tonne)

wk on wk changeOct 10thOct 3rdLast Month*
Rotterdam VLSFO  +42553511486
Fujairah VLSFO  +51597546564
Singapore VLSFO  +49609560571
Rotterdam LSMGO  +58681623599

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