Although tanker rates have seen some improvement since mid-November, shipping companies are likely to face yet another challenging year due to a depressed freight market.
Apart from the global economic slowdown, oversupply of new ships in the market has been keeping freight rates subdued. Industry players feel that freight rates will see meaningful improvement only towards the end of 2013.
“There is still an overhang of over supply of tonnage. We believe towards the end of this calendar year, the equation of supply-demand of tonnage is likely to come back in favour of ship owners on the dry bulk side,” says A. R. Ramakrishnan, MD, Essar Shipping.
Apart from a strong seasonal winter demand, a disruption in oil supply chain due to hurricane Sandy, and a strong demand from South America, West Africa and EU, helped product tankers get higher charter rates since November.
According to market fixtures reported by various brokers, the rate for a Very Large Crude Carrier improved from an average of $844 a day in October to $11,832 in November and $12,285 in December. In the last two months, however, the rates slumped to $9,000 and $3,000 levels.
World oil demand
According to the Organisation of Petroleum Exporting Countries, the world oil demand is expected to grow by 0.8 million barrels a day to an average of 89.6 mb/day in 2013. Also, with the US turning into a net exporter of oil products and new super refineries starting production in Asia, trading patterns are expected to change.
“But any meaningful improvement in the tanker charter rates is negated in the medium term on the back of steady new fleet addition,” Great Eastern Shipping feels.
On the bulk cargo side, rates for the larger ships improved in the first half of last quarter due to increased iron ore shipments from Brazil and Australia to China. The Baltic Dry Index moved up from 952 in October to 1,025 in November and then slumped to 856 in December.
In the last two months, it hovered between 750 and 820. Analysts feel the dry bulk fleet may grow 15 per cent in 2013, with scrapping last year being 33 million DWT.