• BIST 95.852
  • Altın 190,976
  • Dolar 4,6622
  • Euro 5,4311
  • İstanbul 27 °C
  • Ankara 27 °C

25% slump in freight rates

25% slump in freight rates
A 26-mile-long line of idled oil tankers, enough to blockade the English Channel, may signal a 25 percent slump in freight rates next year.

A 26-mile-long line of idled oil tankers, enough to blockade the English Channel, may signal a 25 percent slump in freight rates next year.

A 26-mile-long line of idled oil tankers, enough to blockade the English Channel, may signal a 25 percent slump in freight rates next year. The ships will unload 26 percent of the crude and oil products they are storing in six months, adding to vessel supply and pushing rates for supertankers down to an average of $30,000 a day next year, compared with $40,212 now, according to the median estimate in a Bloomberg News survey of 15 analysts, traders and shipbrokers. That"s below what Frontline Ltd., the biggest operator of the ships, says it needs to break even.

Traders booked a record number of ships for storage this year, seeking to profit from longer-dated energy futures trading at a premium to contracts for immediate delivery, according to SSY Consultancy & Research Ltd., a unit of the world"s second- largest shipbroker. Ships taken out of that trade would return to compete for cargoes just as deliveries from shipyards" largest-ever order book swell the global fleet.

?The tanker market has been defying gravity,? said Martin Stopford, a London-based director at Clarkson Plc, the world"s largest shipbroker. Stopford has covered shipping since 1971.

More than half of the ships are in European waters, with the rest spread out across Asia, the U.S. and West Africa. Lined up end to end, they would stretch for about 26 miles.

Storing Crude

Traders are storing enough crude at sea to supply the 27- nation European Union for more than three days. Royal Dutch Shell Plc, Europe"s biggest oil company; London-based BP Plc; JPMorgan Chase & Co.; and Morgan Stanley were among those that sought vessels for storage.

By the end of November, 168 tankers were storing crude or refined products, according to data from Simpson, Spence & Young Ltd., the world"s second-largest shipbroker. Their combined carrying capacity of 23.8 million deadweight tons is equal to 5.9 percent of the tanker fleet. That exceeds the previous record, set in 1981, when Japanese refiners used tankers with a combined 19.5 million deadweight tons.

The storage helped prop up tanker rates this year as the Organization of Petroleum Exporting Countries, accounting for 40 percent of global oil supply, made the deepest-ever output cuts in response to the worst global recession since World War II.

The storage trade is profitable so long as the spread between energy contracts exceeds ship rental, insurance and financing costs. A year ago, the spread between the first and sixth Brent crude-oil contracts traded on the London-based ICE Futures Europe exchange was 23 percent. Now, it"s 4 percent.

Supertanker Fleet

Daily returns from leasing supertankers on the industry"s benchmark route from Saudi Arabia to Japan advanced to $40,212 on Dec. 24, compared with $1,246 on Sept. 11, data from the London-based Baltic Exchange show.

?If tanker rates go up, everybody will get rid of ships,? said Andreas Vergottis, Hong Kong-based research director at Tufton Oceanic Ltd., which manages the world"s largest shipping hedge fund. ?It"s going to be a market that"s worse than 2009.?

Vergottis expects the global tanker fleet to expand about 12 percent next year, of which 5 percentage points will come from ships returning from storage. That compares with the Paris- based International Energy Agency"s forecast for a 1.6 percent gain in global oil demand.

Crude-oil storage will slump to 40 million barrels in six months and 19 million barrels in a year, from about 50 million barrels now, according to the Bloomberg News survey. Oil-product storage will shrink to 69 million barrels in six months and 29 million in a year, from 98 million now, the survey showed.

"A Lot Longer"

Brent crude will average $75 a barrel next year, about 1.7 percent less than the closing price of $76.31 on Dec. 24, according to the median of 37 analyst estimates compiled by Bloomberg. Gasoil will average $679 a metric ton next year, compared with $628.50 now, forecasts compiled by Bloomberg show.

Storage ?already lasted a lot longer than most people anticipated,? said Jonathan Chappell, an analyst at JPMorgan in New York with ?underweight? recommendations on Frontline and Overseas Shipholding Group, the largest U.S.-based oil-tanker owner.

Ships unloading their cargoes will rejoin a fleet set to expand 3.5 percent next year, according to London-based Drewry Shipping Consultants Ltd. The order book for tankers stands at 121 million deadweight tons, or 32 percent of the existing fleet, it estimates. Deadweight tons are a measure of a ship"s capacity for carrying cargo, fuel and supplies.

Oil-Tanker Owner

Frontline dropped 17 percent in Oslo trading this year, and was 1.8 percent higher at 165.8 kroner as of 1:41 p.m. in Oslo. Overseas Shipholding gained 6.8 percent in New York this year. The MSCI World Index of equities in 23 developed nations advanced 28 percent, heading for its best year since 2003.

Five out of 27 analysts covering Frontline recommend buying the stock, while for New York-based Overseas Shipholding it"s three out of 17, recommendations compiled by Bloomberg show.

The 2010 average tanker rate of $30,000 in the Bloomberg survey would still be 30 percent higher than this year"s average of $23,130, according to data from the Baltic Exchange. In May, July, August and September, charter rates fell so low that ship owners were contributing toward fuel as well as paying the crew, insurance, repairs and other running costs.

Frontline, based in Hamilton, Bermuda, announced last month its first quarterly loss in seven years. Its supertankers need $32,900 a day to break even, the company said. Ship owners usually hire their vessels out in the spot market and on longer rentals at fixed prices.

Single-Hull Tankers

Unprofitable tanker rates may encourage owners to scrap more ships, according to Nikhil Jain, a Delhi-based editor for Drewry"s Tanker Forecaster report. A global ban on single-hulled tankers is scheduled to be phased in from next year, potentially further shrinking vessel supply. Single-hulled supertankers, deemed ?more accident-prone? than double-hulled vessels by the European Union, account for about 17 percent of the total fleet, according to Lloyd"s Register-Fairplay data.

The elimination of single-hull tankers will lead to ?negative fleet growth? and rising charter rates in 2010, said Jens Martin Jensen, chief executive officer of Frontline"s management unit. ?I still believe in increased oil demand compared to today,? he said.

The Federal Reserve will likely keep interest rates low, curbing financing costs for those storing cargoes, said Morten Arntzen, chief executive officer of Overseas Shipholding.

Global Recession

?I don"t see this collapse as tankers come out of storage,? he said. Oil consumption will strengthen next year and the additional demand will require ships to travel further, buoying freight rates, Arntzen said.

Demand for ships may also improve after governments spent at least $12 trillion to lift their economies out of recession. U.S. gross domestic product will expand 2.6 percent next year, compared with a 2.5 percent contraction this year, according to the median estimate from 58 economists. The eurozone will advance 1.1 percent, rebounding from a 3.9 percent decline this year, the survey shows.

The recovery may not be smooth. The announcement on Nov. 25 that state-controlled Dubai World would seek to freeze or delay debt repayments stoked concern that a default would add to the $1.7 trillion of credit losses and asset writedowns posted by global financial companies since 2007.

?There are a lot of things to worry about on the economic front,? Clarkson"s Stopford said. ?You don"t get over body shocks like that overnight. You get run over by an 8-wheeler truck and you don"t go back to work the next day.


This news is a total 1538 time has been read
  • Comments 0
    UYARI: Küfür, hakaret, rencide edici cümleler veya imalar, inançlara saldırı içeren, imla kuralları ile yazılmamış,
    Türkçe karakter kullanılmayan ve büyük harflerle yazılmış yorumlar onaylanmamaktadır.
    Bu habere henüz yorum eklenmemiştir.
Other News
All Rights Reserved © 2006 TURKISH MARITIME | İzinsiz ve kaynak gösterilmeden yayınlanamaz.
Phone : 0090 212 293 75 48 | Fax : 0090 212 293 75 49 |