Cross-NWE clean freight rates surge as Russian refinery maintenance ends

Clean spot freight rates on flexi-size ships (20,000-24,999 dwt) in Northwest Europe have risen amid a sharp increase in ultra low sulfur diesel cargoes, following the end of Russia's refinery maintenance season, shipping and trading sources said.
The majority of the as-yet uncovered cargoes out of the Baltic port of Primorsk are ULSD, sources said, though some fresh naphtha cargoes out of Ust Luga are looking to be covered.
Baltic exports of ULSD, Europe's dominant road fuel, are likely to rise in June from the April-May period, with the end of refinery maintenance in Russia and Poland, according to traders.
Meanwhile, demand for the fuel in Western Europe has stayed strong with the improved spring weather conditions, which have incentized drivers to use their cars.
Countries in Western Europe including the UK, France and Germany typically import diesel from Russia, the US and India because their refineries do not produce enough to cover total consumption.
Cross-NWE freight rates were assessed by Platts at Worldscale 185, or $12.69/mt, for 22,000 mt cargoes at Thursday's Platts Market On Close process. This represents a w22.50 jump in rates since May 10 when they were assessed at w162.5, or an increase of $1.54/mt during that period.
Shipping sources continued to peg rates firmer on Friday -- at a range of w190-195 -- for cargoes loading out of the Baltic ports of Primorsk and Ust Luga.
"I guess people are trying to get over the shock of the [sudden] rate increase," said a shipbroker. "Primorsk is shooting out one [cargo] per day."
A charterer added: "It is difficult to peg rates, as quite a few handies [handy-size ships] have been fixed into the Med or Black Sea, which means they are not coming back as quickly as they would with a NWE discharge [putting pressure on the flexi-size vessels]."
Shipping sources said that the lack of handy-size tonnage in the region combined with the injection of cargoes out of Russia has shortened tonnage and put upward pressure on freight rates.
"If you are looking for a cargo for end of May, early June laycans you will get stiffed," added another charterer.
Source: Platts