USGC MR Market Report

USGC MR Market Report

USGC MR (TC14) rates set to extend last week’s rebound as tonnage list tightens sharply into fresh cargo enquiry

The USGC MR market opened this week on firmly bullish footing, with several cargoes quoted immediately and owners already on the front foot. Vessel supply in the Freight Supply and Demand (FSD) model’s 7-day ahead window stands at just 8 ships against a 90-day moving average of 12, placing prompt availability 4 vessels below average. With ships snapped up last Thursday before the long holiday weekend in preparation for a bullish start this week, the prompt list has compressed further to just a few vessels in the next five days.

The FSD model reflects this supply squeeze clearly. Incremental demand stands at 22 vessels, an exceptionally strong demand signal, a record for the model, and with 9 fewer open ships this week relative to last, the model projects spot TC14 rates to firm sharply from WS 464 to WS 545 over the coming week for the 12–21 April load window.

This rebound began playing out last week and the conditions are now in place for it to accelerate. The TA diesel arb that opened on 31 March was a strong leading indicator for higher MR freight rates post correction.

The arb picture is mixed but directionally supportive for near-term cargo demand. The Houston to Rotterdam diesel arb is open in April at +$33.25/mt and Houston to Barcelona at +$16.75/mt, both providing a near-term transatlantic pull. Houston to San Jose gasoline is open across the curve from April through July at between +5.25 and +12.00 cpg, providing consistent Central America demand.

Houston to Buenos Aires diesel flips from closed in April to widely open in May and June, suggesting a strong South American cargo pipeline is building into the second quarter. Nikolas Plonski noted last night that USGC arbs are at all-time highs for the April to May period, driven by the sustained closure of the Strait of Hormuz and the repositioning of Atlantic Basin barrels toward Asia and Southern Hemisphere markets.

Fixture activity over the past several days captures the market at an inflection point. Torm Malaysia was fully fixed loading USG for EC Canada at WS 600, reflecting how elevated near-term rates have become for short-haul employment. STI Miracle and FPMC 36 were both fully fixed loading USG for ECCA and Puerto Moin respectively at $2.1m lumpsum for 10–11 April laycans, consistent with current Caribs market levels. Champion Cornelia is on subs loading Texas City for Chile at $5.2m lumpsum for a 10 April laycan, and Marina M is on subs loading USAC for Brazil.

The presence of multiple vessels on subs and fully fixed deals across short and long-haul routes at elevated rates vs the prior week illustrates continued genuine demand breadth. The overall macro-outlook and positive tailwinds for USGC freight have not diminished.

It’s being reported that Northbound Panama Canal auction fees are approaching $1m, making owners increasingly cautious about committing tonnage in that direction and reinforcing preference for Atlantic employment. The increasing fees illustrate the heightened traffic through the canal as the Pacific market pulls USGC bbls and supports freight demand.

With the 7-day window open tonnage count at just 8 MRs, ideas on remaining cargoes far apart, and owners emboldened by last week’s rate recovery, TC14 & USGC MR rates in general are set to move significantly higher. The correction in rates two weeks ago was unwarranted and provided the catalyst to reopen the TA diesel arbs providing even more freight demand. Charterers that wait to fix risk paying up as the combination of tight vessel supply, strong incremental demand, and open arbs across multiple routes converges. Owners are positioned to push well above last done and should hold firm.

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