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Increasing oil trade and China provide the support
As the global economy continues its recovery from the financial crisis, so does demand for shipping oil from one part of the world to another. As a result, the freight rates for shipping tankers and bulk carriers over TD3 route moved up in April 2010. The freight rate index (sourced by Bloomberg) for the route TD3 (from Ras Tanura, Saudi Arabia, to Chiba, Japan) opened at the 30 days average (as commonly referred to in the shipping industry) of 79.5 Worldscale (WS) points, down by 2.3 per cent over the March close. Further, given the rise in freight rates almost through the month, the opening day's rate of 79.5 WS turned out to be the month low. The route TD3 is one of the busiest routes for shipping crude oil through supertankers from Saudi Arabia to Japan; while Worldscale points are a percentage of a nominal rate, or the flat rate, for more than 3,20,000 specific routes. Flat rates for every voyage, quoted in (US) dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates. Notably, each flat rate assessment gives owners and oil companies a starting point for negotiating hire rates without having to calculate the value of each deal from scratch. Importantly, rates along the Saudi Arabia-to-Japan route set a global benchmark for supertankers.
 Since the month's start the global freight market gained momentum, fuelled by increased international oil transportation and more export-import activity by China. Additionally, the International Energy Association's (IEA) recent upgrading of its world crude consumption forecast for 2010, on expectations that consumption to grow by 1.6 per cent driven mainly by increased demand from emerging markets such as China, added to the bullish sentiments in freight rates.
Moreover, according to TransCore Market Research, in April, spot market freight availability improved by almost 25 per cent over March levels, the highest spot market load volume recorded for April in at least eight years. The improvements indicate a return to pre-recessionary levels in the spot market. Interestingly, according to TransCore, while monthover-month increases are typical of April, this year's (April 2010) increase has far outpaced the four-year average uptick of 11.5 per cent between March and April. Besides, by the month's end, oil tanker freight rates got a further fillip as the BP oil spill in the Gulf of Mexico expanded in severity and market participants anticipated a bounce in crude shipping rates caused by the environmental disaster. Consequently, the 30 days average freight rate for the route TD3 clocked the month high of 88.608 WS on April 28 and closed the month at 88.442 WS, up 8.68 per cent on a monthly basis. - Multi Commodity Exchange, Mumbai |
