Newbuildings arrive at the right time to strengthen market
Industry analysts comment that Scorpio Tankers’ (STNG) newbuildings are arriving at the perfect time. Analysts believe that to the surprise of some that had prematurely written off the ongoing cyclical recovery, the refined products tanker market has strengthened dramatically in recent weeks.
This is mainly led by the ramp-up of Middle East refining capacity, which is adding significant new sources of long-haul refined products tanker demand with current Long Range 2 (or LR2) spot charter rates of around $30,000 per day, the strongest in five years.
Also, analysts comment that current Medium-Range (or MR) spot rates are at the highest levels in 18 months, while the LR2 and Long Range 1 (or LR1) markets are also continuing to strengthen.
Scorpio’s positive outlook
In the fourth quarter of 2014, Scorpio Tankers (STNG) expects to have more than 1,500 extra revenue days compared to the third quarter, mainly due to vessel deliveries. Also, the company believes that 2015 is going to be the real year when the majority of its fleet will be delivered and the fundamentals will play out positively.
The company believes that demand is being driven by a strong fundamental Asian demand, which is a result of not just economic growth but also Australia switching from crude imports to more product imports.
Arbitrages of gasoline and fuel oil from Europe to the United States are currently open and have pushed MR rates in the Atlantic higher. At the same time, longer-range vessels that are moving west to east with the North American Free Trade Agreement (or NAFTA) have cleared the way for the medium range remaining in the Atlantic. Scorpio Tankers is at the beginning of what could be a strong winter season for product tankers, and the company is extremely well positioned to take advantage of it.