Shipping Rates Climb Despite War Fears, But Outlook Remains Hazy

www.financialexpress.com Our Corporate Bureau

Mumbai, March 18: The war fears may be dampening for the trade and industry in general, but shipping has been an exception with the upward movement in freight rates. The tanker and dry bulk segments have seen a spurt in the average daily earnings since the last weeks of January this year.

According to Clarksons, Suezmax tankers quoting a rate of $48,473 per day on January 24, 2003 has gone up to $56,891 per day, while an Aframax tanker has jumped from $36,612 per day to $62,633 per day. Freight rates for clean products has moved from $22,632 to $29,589 for the same period.

Besides the possibility of a US attack on Iraq, a GE Shipping spokesperson attributed it to the recent harsh winter resulting in depletion of petroleum reserves. This, coupled with the race to build an oil inventory across all countries with a stagnant tonnage, resulted in an increase in freight rates, he added.

Further, crude production in Venezuela rose following the 2-month strike being called off in that country. However, the crude production in Venezuela is yet to reflect on the freight rates as the production is yet to reach the necessary scale, he added.

However, according to an Essar Shipping spokesperson, it is difficult to predict whether the current freight rates would be able to hold on as the future looks uncertain. Essar Shipping, however, stands to gain as it has five of its six Suezmax on ‘spot’ basis, while one tanker has been on time charter for a period of six months. GE Shipping, on the other hand, has entered into fresh agreements for time charter in February 2003 with agreement expiring at various periods during the year.

Dry bulk rates too have increased in tandem with tanker rates. In the Capesize segment rates have firmed up from $19,042 per day to $22,533 per day on February 28, 2003, while rates for Handymax went up from $9,625 per day to $10,125 per day for the same period. However, freight rates for Panamax vessels came down from $12,428 per day to 11,378 per day. The improvement in the freight rates in the dry bulk segment has been attributed to steel movement in China. Moreover, the upswing of construction activity in China too has added to the increase in freight rates, an Essar Shipping spokesperson said.