Uncertainty over the outcome of Greece polls and fall in projections of crude oil demand this year tamed global shipping freight markets in the last two weeks.
Although the current quarter got off to a relatively good start for shipping companies as charter rates showed signs of firming up, the dip in rates in the last two weeks came as a dampener. “Markets will remain challenging in the coming quarters, although we expect dry bulk rates to remain comparatively stable,” Mr Anil Devli, Chief Executive Officer of Indian National Shipowners’ Association (INSA), said.
As demand for transportation of crude tanked in the wake of lower consumption, the tanker freight rates took a beating. The daily charter rate for a very large crude carrier (VLCC) sank from an average of $ 17,368 a day in April and $16,362 in May 2012 to $11,062 on June 1, touching a low of $5,686 on June 11. “The cut in oil demand by the IEA (International Energy Association) and decline in oil consumption will keep tanker rates under pressure in the coming months,” admitted Mr Devli. What could provide some support to tanker rates is the increasing long haul shipments, as refineries are going for Latin American crude.
Even the new refineries in India, such as those of Reliance and Essar, are designed to crack dirtier crude, prompting them to haul oil from Latin America for economic benefits.
“These long haul shipments tend to nudge up tanker rates.
Transporting crude from West Asia to India takes about three to four days, but shipping it from Latin America could take between 30 and 40 days,” Mr A.R. Ramakrishnan, Managing Director of Essar Shipping, said.
The Baltic Dry Index slipped from 1,101 in May to below 1,000 mark in June, touching 884 on June 11.
Fears of a slowdown in China and a deepening of the Euro zone crisis could crimp demand for movement of commodities, impacting dry bulk shipping rates in the coming weeks.