Freight
Market Overview
A confirmed deal reprices front-month paper TD3C sharply lower as risk premium evaporates.
However, the forward curve will be slower to price the impact of Atlantic Basin migration.
As vessels cautiously reposition, available AG spot tonnage is short relative to demand.
Do not expect VLCC rates to return to pre-war levels, thus crude landed costs remain high even if crude premiums weaken.
CPP vessels have repositioned en masse from the AG which should drive spot rates higher when the AG barrels return.
As dirty Aframax earnings soften, LR2 vessels clean back up and eventually cap LR rates.
However, the window between initial clean up and normalisation is likely several months, and in this window, spread between TD25 and TC5 paper could widen dramatically.
More refined products are expected to be exported out of the Far East as they are again supplier of choice into Australia and New Zealand.
Expect tonnage to be tight in the front and gradually ease as ships reposition out of the Atlantic and countries restocking on products, supporting spot rates in the near-term.
This would be followed by rate weakness as market dynamics normalise and fleet repositions.
