In a rare move, a 35,000 mt gasoline cargo is likely to be loaded by refining and trading multinational, Phillips 66 from South Korea with an option to discharge on the US West Coast, four shipping industry executives said separately Friday.
The South Korea-Americas route is far more liquid for moving North Asian jet fuel to the Americas but its demand has been severely hit due to the ongoing coronavirus pandemic which has brought airlines services to a near halt on several routes.
A tanker broker said that this is a one-off deal to move gasoline and not common on this route. The last time Phillips 66 moved a gasoline cargo from North Asia to the USWC was in end-February. However, he said the cargo was at the time co-loaded with alkylate. A Phillips 66 executive declined to comment. Efforts to reach another Phillips 66 executive were not successful.
Such gasoline deals on the North Asia-USWC routes can happen only when the arbitrage is open and the freight is weak, sources said.
Demand for tankers in North Asia are very weak but Phillips 66 has a gasoline cargo for loading late next week on the South Korea-Americas route and a Medium Range, or MR tanker, controlled by Waterfront has been hired provisionally for the purpose, said a tanker broker tracking the deal.
The fixture comes with an option to discharge the gasoline cargo at the US West Coast for a lumpsum freight of $900,000, the broker said. An MR tanker typically carries a 35,000 mt cargo.
Another broker said this rate is significantly lower than the prevailing freight on this route of around $980,000-$985,000 because for Waterfront this is a backhaul voyage, which usually goes at a discount.
Waterfront is a shipping arm and wholly-owned subsidiary of Canada-based Methanex Corp., the world’s largest producer and supplier of methanol. To cut down the expenses on a return voyage, ships transporting methanol to East Asia are always on the lookout of a suitable cargo on their way back to New Zealand or the Americas.
However, brokers also pointed out that many of these ships have zinc coated tanks, which make them unsuitable for moving jet fuel at all. Trans-pacific voyages to move jet fuel are done on epoxy coated tankers, where these ships will not qualify even though they are cheaper.
The demand for methanol has also declined during the current pandemic.
Earlier, at least two or three cargoes of methanol on MRs were being estimated into North Asia from New Zealand and one or two from Chile but now the demand has declined, said a source tracking such deals.
Waterfront would then position these ships to move distillate cargoes to Australia and the Americas, he said.
These ships have to undergo very stringent cleaning after discharging cargoes of gasoline or gasoil for a week to 10 days before they can load methanol again, he added.