A big change may be in store for crude and product tanker trade patterns if Sunoco and ConocoPhillips fail to find buyers who are willing to keep their idled US refineries open, according to a researcher at Stamford-based tanker brokerage MJLF.
Sunoco’s decision to exit the refining business made headlines nearly four weeks ago but fears were reignited late last week when ConocoPhillips unveiled a similar announcement citing weakening demand and costly regulatory requirements.
Brokers tell TradeWinds that many industry insiders understand how devastating permanent closures would be for the suezmax sector but few have truly grasped how significant a shift in market fundamentals would be for product carriers.
In response to a flood of questions from clients MJLF commissioned a report to examine the topic at greater length, a move that gave the Connecticut brokerage an opportunity to test its new hire’s analytical muscles.
(click HERE to read the report in full)
Lichtblau’s legacy will be hard to follow, notes one local broker, as the director of research and analysis spent 13 years with his former employer before picking up the same title at True North Chartering, a fledging shop that has gradually built up its desk by poaching talent from MJLF in the years that followed its 2009 inception.
Bogden proved his market prowess when he found that required suezmax fleet capacity would decrease by approximately nine vessels as a result of sustained refinery closures, a reduction that could potentially trim volume on a benchmark route that links the eastern US to West Africa.
“The VLCC, and to a lesser extent aframax segment will experience some positive benefits, however, the most significant impact will be to product tanker markets,” he wrote in the MJLF impact study.
If the refineries were to shut for good the analyst believes product tanker demand would expand by more than 27 medium-range (MR), 13 long-range-two (LR2) and four long-range-one (LR1) carriers as closures have the potential to alter trade patterns.
He noted: “When factored into the greater US macroeconomic outlook, Padd I refinery closures will accelerate expansion of US product tanker trade patterns. The US has been increasingly trending towards becoming a product export center, with exports surpassing imports for the first time in 2011 by approximately 87 KB/d.
“The closure of the facilities will return the US to an import centered market. However, MJLF expects US exports to emerging economies, most notably Latin America and Africa, are also likely to continue to expand.”
If the US absorbs more overseas imports in an attempt to satiate growing demand while cashing in on exports to emerging markets, Bogden believes the nation’s product trade patterns will grow by as much as 32% from current levels by the second half of 2012.
Headquartered in Stamford, MJLF’s network also includes an office in Athens. The firm is led by industry veterans Bob Flynn and Charles Mallory, who heads the group’s real estate wing.(Copyright)
