Demand on the Northeast Asia-to-Southeast Asia route remains muted, due to refinery turnarounds in the former and lower import demand in the latter (read more here). This coincides with weaker demand for the longer-haul Southeast Asia-to-Oceania route, creating a cocktail of demand-side pressures that has kept MR supply elevated in East Asia.

PADD 5 and Mexico West Coast have seen 60% of their gasoline imports in these regions come from Asia in May (days 1-25). This is directly linked with higher gasoline import requirements from PADD 5 due to both planned and unplanned refinery outages.The high seasonal import demand observed this year from both the US and Mexico West Coast is likely to increase in future, as announced PADD 5 refinery closures through 2026 will likely cement this dynamic.

For APAC MRs, this is likely to prove an increasingly dependable source of demand, with the added benefit of offering another way to reposition to the Atlantic Basin from APAC. Vessels discharging in the Americas West Coast after a transpacific voyage would have the optionality of remaining in the Americas West Coast (intra-PADD 5 or PADD 5-to-West Coast LatAm). Alternatively, vessels could discharge the Asia-origin cargo in the Americas West Coast, then ballast northbound through the Panama Canal to arrive in the Gulf of Mexico and trade on TC14 or TC18.

Traditionally, MRs located in APAC face more complexity when repositioning to the Atlantic Basin. Common routes include carrying a biofuels cargo from Southeast Asia to Europe. This is usually followed by a TA gasoline voyage on TC2. However, the biofuels market is small, and this option is open to only a few players. Other options include a long ballast voyage from East Asia to the Middle East, followed by carrying a middle distillate cargo from the Middle East to Europe. Less frequently, operators manage to avoid the long ballast leg from East Asia to the Middle East by carrying a middle distillate cargo from Southeast Asia to East Africa, then ballasting to the Middle East, where the vessel picks up a middle distillate cargo to take to Europe.

How does the APAC-Americas West Coast reposition play stack up?

As shown on the chart below, the transpacific voyage from East Asia to Americas West Coast, followed by a ballast voyage through the Panama Canal to the Gulf of Mexico involves the lowest laden share throughout the whole APAC-to-Atlantic repositioning process compared to the other options. However, its benefit lies in its flexibility as operators could choose between returning to APAC if market conditions pick up, remaining in intra-Americas West Coast trade, or heading across to the Atlantic Basin. Aside from the niche biofuels-to-Europe routes, the other repositioning options require a middle distillate cargo from the Middle East-to-Europe. Although the values below were calculated assuming a Red Sea transit based on historical behaviour, most operators do not want to risk this transit and would instead have to find a charterer willing to commission an MR-sized cargo to Europe via the Cape of Good Hope. This is unlikely and further emphasises the lack of flexibility most APAC-located MRs have to reposition to the Atlantic.

Moving forward, this transpacific motor fuels demand from the Americas West Coast points to increased flexibility for APAC MRs during seasonal lulls in demand. Northeast Asia’s refinery maintenance in the late spring/early summer, monsoon season in SE Asia and the reduced demand for transport fuels from Oceania during the Southern Hemisphere’s winter months all serve to suppress demand for MRs in APAC. This seasonal lull occurs at the same time as US PADD 5 and the Atlantic Basin are gearing up for higher transport fuel demand due to the summer travel season. Higher transpacific demand in the summer months would offer a welcome seasonal migration opportunity with a high level of optionality for APAC MRs facing bearish vessel supply fundamentals.