Tankers cruise; rates for containers, dry bulk fall

Tanker owners have remained insulated from the disruption in global trade due to the COVID-19 pandemic that has resulted in charter rates of dry bulk and container carriers crashing as demand has dried up, Crisil Research said.

“That’s because a crash in crude oil prices earlier this year had led to a situation known as ‘oil contango’, wherein the price of an oil futures contract exceeded the spot price. This sparked a rush for booking vessels to be used as floating storage. Thus, even as dry bulk and container rates wallowed, tanker charter rates were 44% higher on-year in the first half of 2020,” it said.

Crisil Research expects dry bulk trade to fall 4-6% on-year in 2020, led by weak industrial demand and muted steel production, which would hit coal and iron ore procurement.

As per the report, container charter rates are expected to fall 20-23% on-year in 2020 on the back of a 10-12% decline in container trade, impacted by lower consumption demand from likes of the EU and the U.S.

‘Some cushion’

“Given that the tanker segment constitutes a large chunk (63%) of the Indian fleet, the surge in tanker rates provides some cushion to a drop in revenue. However, the oil contango... is now tapering,” Crisil said.

“We expect Indian shipping players’ revenue to decline 9-11% due to reduced trade globally,” it added.

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Printable version | Jul 30, 2021 5:47:56 AM |

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