Analysis: Soaring tanker freight rates are driving up fuel costs in Mexico

HOUSTON/MEXICO CITY, Aug 4 (Reuters) – High rates around the world for transporting oil are driving up fuel costs in Mexico as importers face tanker charges on Mexico’s busiest shipping route. North America that are more than double the levels seen in recent years, traders and shippers said.

A reshuffle in global oil flows following Russia’s invasion of Ukraine and high marine fuel prices have pushed up transportation costs for most fuel shipments.

On routes to Mexico, the extra costs have added price volatility to an otherwise stable freight market, according to data from Refinitiv Eikon and people familiar with the matter.

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The tariffs are the latest blow to state oil company Petroleos Mexicanos (PEMX.UL), which controls the bulk of fuel imports later sold at subsidized retail prices. They are also hitting private importers bringing in shipments from the United States and elsewhere, many of whom complain of a sloping playing field.

Mexico is Latin America’s largest fuel importer and the world’s fourth largest gasoline buyer. More than half a dozen loaded tankers ply the Gulf of Mexico every day.

Tariffs for tankers carrying U.S. refined products to Pajaritos in Mexico – the main port of entry for imported fuel – reached $39.16 a ton on August 1. Between 2017 and the first quarter of 2022, these costs never exceeded $18 per ton.

Tanker freight rates from the Gulf Coast of the United States to the Atlantic coast of Mexico hit a record high in April, and they exploded again in August

Other busy fuel transport routes, including the Middle East-Europe and Singapore-China, have also seen high volatility since March, according to Eikon data. But those rates haven’t surpassed 2020 highs, when strong demand for floating storage left the market with few tankers available.

Mexican importers have limited options to lower their bills.

“We pay $50,000 a day for tankers coming from the US Gulf Coast,” said a Mexico-based shipper. “Mexican ports do not accommodate larger tankers which would reduce costs, storage is limited and we compete with Pemex lump sum contracts,” the person said.

Under a lump sum contract, a tanker is chartered for a one-way trip regardless of the size of the cargo. Demurrage charges for late delivery are not paid if a trip takes longer, but loading and unloading charges are levied on the charterer.

Pemex did not respond to a request for comment.

OLD AND NEW ISSUES

U.S. fuel exports to Mexico rose slightly in the first five months of this year to 1.2 million barrels per day (bpd), from 1.12 million bpd in the same period of 2021, reflecting post-COVID demand recovery and domestic production shortfall.

The country has struggled to make room for this 7% increase in fuel imports as Pemex faces a limited tanker fleet and insufficient pipeline and storage capacity, resulting in fuel bottlenecks. throttling in the ports. Congestion also contributes to higher freight rates when renewing charter contracts.

The administration of President Andres Manuel Lopez Obrador hopes the construction of a new refinery will reduce the country’s imports and make it more fuel self-sufficient, but Mexico’s purchases have not diminished. Read more

As of Aug. 3, more than 40 tankers were waiting to unload in Mexico, nearly half of them for a week, according to Eikon data. Wait times are longer at ports on the Pacific coast, where infrastructure constraints are greater. Tankers carrying gasoline from China, Singapore and the United Arab Emirates added to the reserve.

The vessel bottleneck is smaller than in 2020, when imports forecast by Pemex business unit PMI ran into falling fuel demand amid COVID-related lockdown measures. But congestion is slowly increasing, according to the data.

In addition, Lopez Obrador gave priority to imports from Pemex rather than permits to private distributors, a practice denounced by certain energy companies, leaving most of the purchases to PMI.

After paying the high freight rates, Pemex sells imported fuel at subsidized retail prices that have contributed to heavy losses in recent years. This year, however, the company is on track for a full-year profit. Read more

Unable to profit from imports, many Mexican distributors end up buying most of their fuel from Pemex.

“This price volatility comes from the war. Roads that used to be completed in 10 days now take months. If there are fewer tankers available, like in Mexico, it’s even more expensive,” a trader said. from Pemex.

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Reporting by Marianna Parraga in Houston and Stefanie Eschenbacher in Mexico City; Editing by Tom Hogue

Our standards: The Thomson Reuters Trust Principles.

Marianna Parraga

Thomson Reuters

Focused on energy, corruption and money laundering related sanctions with 20 years of experience in Latin America’s oil and gas industries. Born in Venezuela and based in Houston, she is the author of the book “Oro Rojo” about the ailing Venezuelan state company PDVSA and a mother of three boys.

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