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MR Activity into E.C. South America

Nov. 5, 2021

In the past week or so we have seen increased activity in the USG on the MR2 sector and as a result freight rates have quickly reached yearly highs.  One particular trade of interest is to the East Coast of South America, a trade that we have been highlighting in our recent Tanker Market Outlooks due to its potential for growth both in the short and medium term.  In fact, the TC20 USG to South Brazil route has seen a sizeable freight increase from WS 122.5 in the beginning of last week to WS 190 today.

Demand for clean products in the two main South America East Coast markets, Brazil and Argentina has been increasing recently due to a multitude of factors.  For the former, severe droughts are hampering power production in hydroelectric plants, forcing them to look for alternative feedstocks such as gasoil in the interim.  For the latter, gasoline demand has reportedly reached pre-pandemic levels, while local refineries are also reported facing delays in bringing back refining capacity from planned maintenance and upgrades, effectively widening the deficit.

With these developments in mind, we looked into our AIS-derived MR tanker loading data for the US Gulf, where a clear upward trend is visible for October, one that will likely continue into November (Figure 1).  Aiding this movement is the returning refining capacity in the US Gulf region from planned maintenance.  We anticipate that a sizeable portion of the additional production will likely find its way into E.C. South American markets, resulting in increased activity and potentially even higher freight rates in the short-term. 

Source: McQuilling Services