Maritime Newsletter

Freight market may remain volatile - 2010-07-05

Global freight rates in the tanker and dry bulk segments have been more or less firm so far this fiscal, primarily because of the shortage of vessels on certain routes, scrapping of single-hull tankers and steady consumption of raw materials by China. Shipping analysts feel that the tanker market may remain firm in the coming months, especially with world oil demand expected to increase to 86 million barrels per day in 2010, about two per cent higher than in 2009. In the dry bulk side, increased steel production and coal movement in China may keep rates buoyant in the short term, but oversupply of ships in the market may keep a lid on freight rates in the medium to long term. Overall, the shipping community feels that the market will retain some volatility in the coming months. In the tanker segment, Very Large Crude Carrier (VLCC) rates rose from an average of $25,908 per day in February to $29,491 in March and $37,368 in April. However, there was a marginal dip in May, with the later part of the month seeing VLCC earnings at between $22,000 and $27,000. There was a similar trend in the Suezmax rates, which rose from an average of $14,495 in February to $17,407 in March, $21,900 in April and a high of $32,195 on May 21. A steady improvement in the oil demand from US, which represents nearly 25 per cent of the global oil demand, and significant refinery expansion in Middle East and Asia, could drive demand for product tanker. However, global fleet expansion could curtail fleet utilisation in the long term — global crude and product tanker fleet are expected to register 11 per cent and 12 per cent growth respectively in 2010. On the dry bulk side, the Baltic Dry Index (BDI), which measures cost of shipping bulk raw materials on key routes, traced a growth in May — from an average of 3,043 in April, it breached the 4,000 mark in the later half of May, touching 4,209 on May 26. While in the short term unusual weather patterns such as droughts could lead to increased movement of grain and steam coal, oversupply of fleet could keep the charter rates under pressure.Source: Business Line