Long Range tanker freight rates on the Mediterranean to Japan route, basis 55,000 mt, fell to a one-and-half-month low on a closed naphtha arbitrage and after a few LR tankers were heard available in the Northwest Europe region, shipping and trading source said Tuesday.
According to Platts data, freight on the trip fell $200,000 to a $2.1 million lump sum, equal to $38.18/mt — the lowest assessment since December 1 it was $36.36/mt.
LR tankers could ballast from the Persian Gulf and West Africa which could put pressure on freight rates, according to shipping sources. However, it was not clear at the time of writing how many ships were ballasting to Northwest Europe.
LR2 tanker freight rates on a Med-Japan trip, basis 80,000 mt — an active route for naphtha — were also heard to have fallen, down $300,000/mt to a $2.7 million lump sum, due to low demand. Platts does not yet assess freight on this route, basis 80,000 mt, but will from February 1 onwards.
Meanwhile, the front-month east/west spread — the premium of CFR Japan naphtha cargo swaps over the CIF NWE naphtha cargo swap — narrowed to a fresh three-month low of $26.25/mt Monday, down from $26.50/mt Friday, hitting sentiment as it worsened the economics of an already closed arbitrage from Europe to Asia.
In the meantime, the front-month CIF NWE naphtha crack swap slumped to a two-month low of $1.15/b Monday, from $2.20/b Friday, and the February/March CIF NWE naphtha spread flipped to a 75 cents/mt contango from a 75 cents/mt backwardation as concerns grew over the closed arbitrage to Asia and the increased likeliness of naphtha cargoes coming from the the Med to Northern Europe.
On Tuesday, cash differentials for naphtha fell further in Asia on news China’s CSPC shut its naphtha-fed cracker in Huizhou, Guangdong province, due to wintery weather conditions.
The Asian naphtha market has weakened recently due to an overhang of cargoes for February as well as news Friday that Japan’s Mitsubishi Chemical shut its No.2 naphtha-fed steam cracker at Kashima after experiencing an unspecified issue at the plant.