Low Freight Rates Cut Costs for Importers

Friday, February 02, 2001
Oil freight costs that have fallen sharply from record peaks two months ago are helping reduce energy import bills already eased by lower crude prices.

Tanker market experts said freight charges that rocketed to unexpected heights in November looked set to remain under control over the next six months at least.

Very Large Crude Carriers (VLCCs) delivering crude to Japan and Singapore from the Middle East now charge about Worldscale 85, $1.40 per barrel, having peaked last November at W190, $2.65 a barrel. Supertanker rates to the United States also are lower at about $2.30 a barrel from the Gulf $3.20 a barrel in November.

"More new ships will be coming in, and scrapping has slowed down, so rates will soften compared to the fourth quarter of last year, but we expect the market to remain relatively strong," said Pankaj Khanna, tanker analyst at London shipbroker SSY. At the start of 2001 the Worldscale Association revised its flat rates upwards by around 20 percent, and this gave the impression of rates falling.

Brokers said the Chinese New Year holidays then slowed trading in January, and that, combined with talk of OPEC production cutbacks, was enough to damage tanker owners' confidence.

Tanker charterers have taken advantage by hammering rates back down, but the market's fundamentals remain sound, they said. Oslo-based Fearnleys estimates growth in seaborne oil trade at 3.5 percent in 2001, compared to 4.5 percent in 2000. Meanwhile, the world tanker fleet is forecast to expand by 2.5 percent.

Brokers expect sentiment to recover from today's W85 to average W95 ($1.61 per barrel) on eastbound VLCC routes for the next 12 months.

Oslo shipbroker PF Bassoe said tanker supply rather than charterers' demand would dictate rates in 2001.

"Some claim we have started the inevitable downward cycle and that the next year and beyond will be painful (for tanker owners," it said in a market report.

"All we can say is look beyond temporary distortions in tanker demand. The key element over the medium term is tanker supply," says Bassoe.

SSY's Pankaj Khanna said the tanker market had a built-in safety valve, which would prevent freight falling too much further.

"In today's market, profit margins for older tankers going west from the Middle East are thin, perhaps only a couple of thousand dollars per day," he said.

"If rates fall much below W70 for those trips, then ships facing their fifth special survey (vessels turning 25 years old) are more likely to be scrapped. That will redress the supply-demand balance back in favor of newer tankers."

Volatility on some routes is expected to continue. Brokers recall Caribbean tanker rates nearly doubling in the space of one day in November. Charterers fixing on the morning of November 8 were paying $1.19 per barrel, but those that waited until the afternoon were forced to pay $1.89 per barrel to shift their cargoes. "It's as volatile as it ever was, perhaps more so," said one London broker. - (Reuters)

Maritime Reporter August 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Ingram to Build 20 Tank Barges in 2015

Ingram Barge Company announced that it will build 20 tank barges in 2015 to meet growing demand for chemical shipments. While most of the company’s recent tank

Webinar: 3D Laser Scanning in the Marine Industry

Maritime industry professionals have increasingly taken notice of 3D laser scanning in recent years as acceptance for the technology and its applications mounts throughout the sector.

Shuster Receives Champion of Maritime Award

Congressman honored for support of domestic maritime industry.   Rep. Bill Shuster (R-Pa.) this week received the 2014 Champion of Maritime Award from the American Maritime Partnership (AMP),

Energy

Ingram to Build 20 Tank Barges in 2015

Ingram Barge Company announced that it will build 20 tank barges in 2015 to meet growing demand for chemical shipments. While most of the company’s recent tank

Senator Says 2015 Could Be Time for US Oil Export Bill

The top supporter in the U.S. Congress for reversing the 40-year ban on crude oil exports, Senator Lisa Murkowski from Alaska, said next year could be the time for a bill on lifting the restriction.

Oil Edges Below $99 but Supply Risks in Focus

Oil traded slightly lower below $99 a barrel on Thursday, pressured by ample supply and concern over the weakening of demand growth in major consumer nations, as well as a rise in the U.

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Maritime Standards Naval Architecture Pipelines Port Authority Salvage Ship Repair Shipbuilding / Vessel Construction
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1775 sec (6 req/sec)