The brief flicker that the global freight market experienced in the fourth quarter of last fiscal when tanker rates rose marginally due to increased movement of oil for heating, appears to have sputtered out with tanker charter rates taking a flat course last month.
Ship owners are not very optimistic on their outlook for the freight market for at least the next six months, with earnings expected to remain frail for most part of the current fiscal.
Not only the tanker rates, but even on the dry bulk segments, ship charter rates are not showing any signs of firming up, especially as demand for commodities are not picking up even as new ships join the global fleet.
“From the perspective of the industry, we continue to have a cautious outlook for the freight market for the next six to 12 months. But as a company, we are well hedged, as almost our entire fleet of 25 vessels are on long term contracts ranging from three to five years,” Mr A. R. Ramakrishnan, Director of Essar Shipping, Ports and Logistics Ltd (ESPLL), told
The daily hire charges for a very large crude carrier (VLCC), for example, had risen from an average of $7,314 and $7,365 in the second and third quarters of last fiscal to $9,305 during the January to March 2011 quarter.
But last month, as demand for movement of oil thinned, the charter rates slumped to about $2,400 in the first week of April and a little above $1,047 on April 26.
The same VLCC rates had touched an average of $37,368 a day in April 2010.
On the dry bulk side, the Baltic dry Index had a steady fall from 3,297 in the first quarter of last fiscal to 2,358 and 1,360 in the third and fourth quarters, respectively.
In the latter half of last month, the index hovered at about 1,250 levels.
Analysts feel that the dry bulk market could firm up in the coming months, after Japan resumes import of iron ore for its steel industry as it ramps up its reconstruction process.
However, the addition of new ships in the global fleet, which is estimated to be 25 per cent of the existing fleet in the next two years, will continue to keep freight rates on a leash, especially in the bulk segment.