Record LR2 earnings and stronger Aframax markets contrast with softer Suezmax and VLGC rates, while Chinese car sales support demand for vehicle transport.
Tankers: Aframax earnings rise as LR2 benchmark reaches a record
Last week, average earnings were around USD 667,000 per day for Suezmax and USD 359,000 per day for Aframax. The 2025 averages were around USD 58,000 and USD 46,000 per day. Two forces support earnings. First, shuttle operations and ship-to-ship transfers in the Middle East absorb a large part of the fleet. Second, very high VLCC freight costs shift crude cargoes from VLCCs to smaller tankers (see Topic of the Week). One-year Suezmax timecharter rates were around USD 170,000 per day last week, against an average of USD 38,000 per day in 2025. Freight futures for the Suezmax route from West Africa to Northwest Europe price 2027 at around USD 84,000 per day. This shows that the market expects earnings to fall, but to remain above 2025 levels.
LPG/VLGC: Spot earnings ease, with renewed momentum late in the week
VLGC spot earnings on the US Gulf–Japan route fell 9% week-over-week to around USD 185,000 per day. A fixture below market expectations and a narrower US–Asia LPG price spread initially weighed on freight, before the spread widened and rates recovered to USD 315 per tonne on Houston–Chiba. One-year timecharter assessments for modern VLGCs stand around USD 108,000 per day, compared with an average of USD 42,000 in 2025. New vessel supply remains a longer-term risk: orders across the LPG carrier sector total 133 ships so far in 2026, against 62 in all of 2025. However, around 64% of VLGC and VLAC capacity on order is scheduled for delivery in 2028 or later.
PCTC: Chinese brands gain ground in Europe as charter rates hold firm
Sales of Chinese-brand cars in Europe rose 104% year-over-year in September, according to preliminary Dataforce data, which gave Chinese brands a record 14.5% share of the European car market. Chinese manufacturers still produce most of these vehicles in China, so higher sales increase demand for car carriers on the long-haul trade from China to Europe. Timecharter rates for 6,500 CEU car carriers remain at USD 95,000 per day, unchanged from September and up from USD 80,000 per day in July. Over the longer term, local production in Europe is the main risk to this demand. BYD will begin assembly at its first European plant, in Hungary, in the fourth quarter of 2026, and Chery expects its Barcelona joint venture to start production in 2026. Cars built in Europe do not require deep-sea transport, so local production would reduce long-haul volumes for car carriers.
Geopolitics: Attacks threaten infrastructure used for export routes around Hormuz
This past week, Houthi attacks targeted Saudi Arabia’s Yanbu port and Shaybah oil field, raising concerns over infrastructure used to sustain oil exports. Yanbu is the Red Sea terminal of Saudi Arabia’s East-West pipeline and the country’s main crude export route outside Hormuz. Iran also targeted at least eight blacklisted tankers between 16 and 23 October, despite the ships not actively transiting the Strait. This follows Iran’s warning on 11 October that it could target vessels in shuttle operations in any location. Since the start of October, shuttle operations have accounted for roughly 70% of identified outbound crude movements through Hormuz. Further attacks on these vessels could tighten vessel availability and support freight rates, although prolonged disruption could also reduce cargo volumes. Brent ended last week near USD 117 per barrel, more than 20% above its September average, although Middle East crude exports are close to pre-conflict levels. This shows that the oil price reflects the risk of further supply disruption. The main downside risk for tanker earnings is de-escalation, which would reduce the risk premium in freight rates and release vessel capacity.
Sources: Baltic Exchange, BRS Shipbrokers, Clarksons & TradeWinds
