Product tanker owners are posting record earnings as the closure of the Strait of Hormuz forces long-haul voyages from the Atlantic Basin to replace Middle East volumes, executives at two major ship owning companies said in May 7 earnings calls.

International Seaways reported a blended average spot time charter equivalent rate above $100,000/day fleetwide in the first quarter, and Ardmore Shipping’s medium range tankers earned $52,100/day, the companies said.

The disruption has trapped about 130 product tankers in the Persian Gulf, tightening vessel supply while refined product flows from the US, Europe and West Africa replace lost Middle East volumes on voyages roughly double the normal length, Ardmore President Bart Kelleher said during the company’s call.

“The Strait of Hormuz closure is disrupting approximately 15% of global oil product flows and 30% of crude flows,” Kelleher said.
International Seaways has secured 45% of its expected second-quarter revenue at the elevated rates, while Ardmore has booked 55% of its MR fleet and 65% of its chemical tanker fleet for the quarter. Ardmore’s MR spot rates are running nearly five times the company’s operating cash breakeven of $10,800/day, Ardmore CEO Gernot Ruppelt said during an earnings update.

Fleet expansion
The strong market conditions are prompting fleet investments despite “an order book that has grown to about 16% of the existing fleet since end-2023,” Ruppelt said.

Ardmore ordered two highly efficient Handysize tankers at Wuhu Shipyard at $44.9 million each for delivery from late 2028, with options for two additional vessels. The company also invested over $100 million in three vessel acquisitions that have increased in value by an estimated 30% to 35% on a like-for-like basis since purchase.

International Seaways is taking delivery of four LR1 newbuildings in 2026, with two already delivered and the remaining two scheduled for the third quarter. The company added a Suezmax to its fleet on a three-year time charter at $40,000/day.

International Seaways received $223 million in net proceeds from selling seven vessels in the first quarter and spent $28 million on LR1 newbuilding installments.

The market disruption has created notable arbitrage opportunities, with refining margins in the Atlantic reaching their “highest levels since the pandemic recovery,” according to Ardmore. Asian refineries have reduced throughput, with replacement products sourced via long-haul imports from the Atlantic, boosting US exports, the shipowner said.

Product inventories have been significantly drawn down, and a substantial post-conflict restocking requirement should support elevated trading activity for an extended period, Kelleher said.

International Seaways President and CEO Lois Zabrocky said the company expects “the longer the disruption persists, the more meaningful the eventual rebalancing could be” once conditions stabilize, particularly as inventories continue to drop. The company’s expected breakeven for the next 12 months is about $14,900/day.

Time charter interest from oil majors, refiners and major traders has increased significantly, including some long-term interest, though Ardmore has not yet executed new time charters as the “value proposition is not as pronounced as in crude tankers,” Ruppelt said.
International Seaways executives said they prefer to remain in the spot market until stronger rates emerge for longer-term charters, as two- or three-year rates are considerably lower than one-year and spot market levels.
The closure has also affected International Seaways’ lightering business, with second-quarter activity rebounding after first-quarter operations were negatively impacted by volatility and scrambling for alternative crude sources. The company has already booked more lightering jobs for the second quarter than the entire first quarter, with more than half the quarter remaining, CFO Derek Solon said.

VLCC rates
VLCC owners are showing increasing resistance to fixing vessels even at elevated rates, with some holding out for the Strait of Hormuz to reopen rather than accepting Atlantic Basin cargoes, according to market sources.

The last-done rate for a US Gulf Coast-to-China VLCC voyage stands at $17.25 million, but some owners are indicating that level is insufficient, and market participants expect the next fixture could reach $18 million or higher, according to shipping sources.

“Given how things are going, I wouldn’t doubt $20 million for US Gulf Coast-China next week,” one owner said. “Some owners are not even looking at the Atlantic, just waiting for Hormuz to reopen. Some owners feel it’s worth the wait, I know at least two.”

According to market participants, the tight vessel supply is being exacerbated by major charterers, including SK Energy and Chevron, booking their own vessels and taking them off the position list, reducing the variety of owners with ships available and willing to perform these runs.

Source: Platts