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 February 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

ThyssenKrupp Says Submarines Part of Growth Story

Germany's Thyssenkrupp sees its submarine business as making an important contribution to its growth targets, the head of its Industrial Solutions business area said on Tuesday.

Two Newbuilds Delivered to Star Bulk

Star Bulk Carriers Corp. took delivery on February 27 of M/V Honey Badger (ex HN NE 164) and M/V Wolverine (ex HN NE 165), two 61,000 dwt Ultramax bulk carriers

Brazil Truck Strike Diminishes

Some truck drivers in Brazil continued blocking roads on Tuesday, slowing grains deliveries to southern ports, even as adherence to the strike diminished and a

Energy

Oil Storage at Sea Stalls as Profit Play Fades

Traders are cutting plans to use tankers to store oil at sea as the price incentive recedes, the global head of oil at mining and commodities group Glencore's said on Tuesday.

Ferguson Appoints Partner OPS-OES

Ferguson Group Singapore, a specialist in the provision of DNV 2.7-1 / EN12079 offshore containers, reefers, tanks, waste skips, baskets, accommodation and engineering

Former BP Boss Browne is DEA Chairman

Lord John Browne heads DEA's supervisory board * LetterOne co-owners Fridman, Khan also join * Unit changes name to DEA Deutsche Erdoel AG FRANKFURT, March 3 (Reuters) - DEA,

 
 
Maritime Careers / Shipboard Positions Maritime Security Maritime Standards Navigation Pipelines Pod Propulsion Salvage Ship Electronics Ship Repair Sonar
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: 0.1743 sec (6 req/sec)