High Shipping Costs Are Here to Stay, Says Bloomberg
By Henry Ren (Bloomberg) Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers....
By Keith Wallis
SINGAPORE, Dec 4 (Reuters) – Freight rates in Asian trades for very large crude carriers (VLCCs) are likely to remain firm as vessel supply and charter volumes stay evenly matched, ship brokers said on Friday.
They have seen daily earnings soar by between $37,500-$42,000 in the last week.
That came as earnings from the Middle East to Japan hit more than 91 on the Worldscale measure on Thursday, equivalent to $111,359 a day, the highest level since June 23, 2010.
The surge was fuelled by unloading delays in China and South Korea caused by a shortage of storage tank space and other port infrastructure issues and bad weather that could disrupt vessels’ future charter fixtures, two European VLCC ship brokers said on Friday.
“Charterers had an absolute fear of not getting the right ship for the right cargo. That turbocharged activity – charterers came barging into the market with cargoes,” said one of the European brokers on Friday.
That is the third time this year VLCC freight rates from the Middle East to Asia have hit a five year high, Reuters freight data showed.
VLCC rates from West Africa to China also climbed, hitting the highest level since Oct. 15 on Thursday.
“No doubt owners are going to overplay their hand, looking for rates in three figures. But when the market gets silly charterers do alternatives,” the first European broker said.
Charterers are already taking steps to cool the market, holding back cargoes, splitting cargoes into smaller loads or better utilising their own tonnage by increasing vessel speeds, brokers said.
Unipec, the trading arm of Sinopec, chartered two smaller Suezmax tankers earlier this week rather than pay the high VLCC freight rates, brokers and Reuters chartering data showed.
A Suezmax tanker can carry 1 million tonnes, while a VLCC carries about 2 million tonnes.
“I don’t see rates coming off too much. I think owners will defend the W90 level,” a second European VLCC broker said.
Charterers have concluded around 105 fixtures for loading in the Middle East in December, with around 10-15 more cargoes still to be fixed, the two brokers said.
Freight rates for the Middle East to Japan benchmark route nudged above W91 on Thursday, up from 61.50 a week earlier.
VLCC rates from West Africa to China climbed to W80 on Thursday, against W67.50 the same day last week.
Rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia rose to W127.50 on Thursday, compared with W123 last week on strong cargo volumes and tight tonnage supply.
Clean tanker rates from Singapore to Japan slipped to around W107.75 on Thursday, from W108.75 last week. (Reporting by Keith Wallis, editing by William Hardy)
(c) Copyright Thomson Reuters 2015.
Join the 67,425 members that receive our newsletter.
Have a news tip? Let us know.