USGC Freight Market Report

The USGC MR market overshot to the downside at the end of last week as owners got nervous and jumped over each other for short-haul high-earning voyages, dragging TC14 down 125 points to WS 425 by Friday. The correction looks to have found its floor. The combination of lower freight and strong ICE GO spread has reopened diesel arbs into NWE.

A busy start to the Easter week; close to eight ships on subs by Monday COB, which is more than typical for a Monday and points to a market that has repriced and is now drawing fresh enquiry. The Freight Supply & Demand (FSD) model adds further support, with vessel supply at 14 ships in the seven-day ahead window against a 90-day moving average of 12, placing prompt availability 2 vessels above average, but with incremental demand adding 6 vessels to the picture, the model points bullish, forecasting rates to firm from WS 425 to WS 444 over the coming week into the 5-14 April load window.

The distillate arb picture has shifted meaningfully since last week. The Houston to Rotterdam diesel arb is now open across all April load windows, East Coast Canada to Rotterdam diesel is open through all of April and May, and the NYC to Rotterdam arb remains open to the third decade of April. This reopening of transatlantic diesel economics is a direct demand signal for TC14 tonnage and represents a material change from the closed arb picture just last week. Continued strong ICE gasoil spreads have helped reopen the diesel arbs alongside the weaker TC14 rates to close out last week.

Houston to Buenos Aires diesel is firmly open in April, Houston to Santos diesel is open by +6.45 cpg in April widening through the summer, and Houston to San Jose gasoline is open from +10.05 cpg in April and strengthening to +18.70 cpg in June, underpinning multi-route cargo demand well into Q2.

Fixture activity over the past three days confirms the market repricing in real time. Eurochampion was placed on subs loading USG for UKCM at WS 425 for a 6-7 April laycan, and Cape Avanti followed on the same routing at WS 425 for 6-8 April. Piura Pacific was placed on subs loading USAC for UKCM at approximately WS 500 for a 3-5 April laycan; a significant premium over the USG transatlantic level that reflects tight USAC availability and confirms that owners are successfully extracting premiums where tonnage is constrained. T

TC14 paper markets traded mostly sideways to start the week alongside physical fixtures repeating last done levels most of the day before sentiment began to re-firm. May traded at WS 360, June softened to WS 272.5, and Q3 traded at WS 225. Some of the cautiousness in TC14 recently reflects expectations that the current wave of ballasters — four vessels en route from the East toward Balboa, four from UKC, three from West Africa, will eventually weigh on rates. This view is somewhat misplaced though if the Iran conflict continues the US will drive global CPP resupply keeping USGC tonnage is high demand.

With the transatlantic diesel arbs now open, sentiment slowly turning more bullish again heading into a shortened trading week, and owners positioned to push rates higher on any fresh cargo enquiry over the next 48 hours, the fundamental case for a TC14 rate recovery from last week’s lows is building. Charterers should cover near-term April requirements promptly rather than waiting for further softening that appears unlikely to materialize.