THE STRAIT of Hormuz has been effectively closed for two months and shows no signs of returning to normal anytime soon.

All liquid bulk shipping markets have been heavily impacted, but spot rate changes have evolved differently, depending on the segment.

To gauge these differences, Lloyd’s List compared index percentage changes in four segments: very large crude carriers, mid-sized crude tankers, product tankers and liquefied petroleum gas carriers.

The typical pattern amid geopolitical disruption features an initial, panic-induced rate spike followed by a pullback — sometimes to a higher level than before the event, sometimes not.

This was the pattern after US sanctions on Cosco tankers in 2019, the floating storage boom in 2020, the Russia-Ukraine war beginning in 2022 and the Red Sea crisis beginning in late 2023.

Crude and product tanker rates have followed the same script during the Hormuz crisis, albeit with varying timing of highs, and different pullback levels. LPG shipping rates did not initially spike but surged later as market inefficiencies mounted.

Very large crude carriers

The current rate pattern is similar to the one emerging during the Russia-Ukraine war, with small and mid-sized tankers faring better than VLCCs.

The Baltic Exchange’s West Africa-China VLCC time charter equivalent index surged 150% between mid-February and March 3, when it hit $275,369 per day, then quickly fell back as more VLCCs repositioned to the Atlantic basin and sentiment waned.

This index has been fairly steady and hovering around $100,000 per day since mid-March. It was at $100,645 per day on Thursday, down 9% versus mid-February but double the assessment at this time last year.

Mid-sized crude tankers

The Baltic Exchange’s suezmax index (an average of Black Sea-Mediterranean and West Africa-North Europe) jumped along with the VLCC index at the start of the crisis, but it didn’t fall back in mid-March — it kept rising through the end of last month.

The suezmax index peaked on March 26 at $279,748 per day, up 200% versus mid-February, then it plummeted in April.

As of Thursday, it was at $118,607 per day, still up 28% versus pre-war levels and double the assessment a year ago.

The Baltic’s aframax index has closely mirrored the suezmax trend, in terms of percentage moves up and down, during the Hormuz crisis.

Mid-sized crude tanker rates have been buoyed by high volumes of US crude to Europe, mainly on aframaxes, as well as long-haul voyages from the Atlantic basin to Asia via the panamax locks of the Panama Canal.

Product tankers

As mid-sized crude tankers have outperformed and peaked later than VLCCs, product tankers have fared even better than mid-sized crude tankers.

The Baltic’s Atlantic basket for medium -range and handysize product tankers (Europe-US east coast, US Gulf-Europe, triangulated) didn’t peak until two weeks ago.

The Atlantic basket rate tripled, from around $35,000 per day in mid-February to a high of $112,755 per day on April 13. It was at $75,366 per day on Thursday — still double its pre-war level and up 193% year on year.

Product tanker rates have been kept at high levels by continued strong demand for diesel, gasoline and jet fuel in Europe, South America, Africa and Asia, as well as longer hauls, including MR voyages from the US to Asia via the panamax locks of the Panama Canal.

Very large gas carriers

The rate pattern for very large gas carriers has been completely different than for crude and product tankers.

It is not possible to replace lost Middle East Gulf LPG supply with US supply, due to terminal capacity constraints in the US Gulf. This theoretically means too many VLGCs will be chasing too few cargoes.

The Baltic’s US Gulf-Japan VLGC index fell after hostilities broke out, dropping from around $75,000 per day prewar to $38,171 per day on March 11.

Then something unexpected happened: in the second half of March and throughout April, US Gulf VLGC rates rebounded sharply.

As of Thursday, the index was at $142,889 per day, more than triple prewar levels and up 276% year on year.

The current TCE rate is the highest since September 2023, during the Panama Canal drought crisis.

The reason for the unexpected resurgence of VLGC rates: arbitrage spreads and market inefficiencies.

Clarksons Securities reported that the arbitrage between US Mont Belvieu propane and Asia pricing was $300 per tonne at the beginning of this week, up from $250 per tonne in the middle of last week.

Regarding inefficiencies, Clarksons said, “A significant portion of the [VLGC] fleet has traditionally focused exclusively on the Middle East market and has not previously carried US cargoes, meaning [the ships] did not have US Coast Guard approval for US loading.

“This application process is understood to take at least five to six weeks, which has limited VLGCs that would otherwise be available because of limited Middle East export flows.

“It is unclear how many VLGCs have applied for US Coast Guard approval, but some estimates suggest that as many as 50 have applied.”

The capacity limit of the Panama Canal’s neopanamax locks is yet another factor supporting VLGC rates.

Neopanamax locks transits are dominated by larger containerships. Wait times for ships without a reservation have been increasing. The average southbound (Atlantic to Pacific) wait time at the neopanamax locks was 7.9 days on Thursday.

Transit slot auction prices for those wishing to jump the queue surged in April. According to Argus, the average auction price at the neopanamax locks reached $1.7m in the week ending April 17, the highest weekly average since Argus began collecting this data in January 2024.

Argus said that one neopanamax slot auction reached $4m in April. That matches the previous high reported in November 2023, during the Panama Canal drought crisis.

The net result: more US LPG is taking the longer route around the Cape of Good Hope.

The voyage distance between Houston and Japan via the Panama Canal is 43% longer than the distance between the MEG and Japan, and 2.4 times longer via the Cape of Good Hope.