By Alaric Nightingale
December 21, 2007
Dec. 21 (Bloomberg) -- Declines in the cost of shipping Middle East crude to Asia may slow after falling the most in eight months yesterday because of a shortage of vessels.
Hire rates for very large crude carriers fell as owners tried to secure near-record tariffs before year-end holidays, said Halvor Ellefsen, a tanker broker at SeaLeague AS in Oslo.
The decline ``was bound to happen,'' after ``a few quiet days,'' Ellefsen wrote in an e-mailed note today. ``But there are still lots of cargoes to be lifted, so I can't see this tumbling.''
The London-based Baltic Exchange's benchmark assessment for voyages to Asia fell 10 percent yesterday to 285 Worldscale points. It was the biggest one-day drop since April 11, when rates fell 12 percent. No new tanker bookings were reported.
Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.
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.
At 285 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $261,939 a day on a 39-day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg marine fuel prices.
That means shipping costs for refineries fell to $6.65 a barrel from $7.42 a barrel on Dec. 19.
Breakeven Levels
Frontline Ltd., the world's biggest VLCC operator, said Nov. 15 it needs $30,000 a day to break even on each of its supertankers. Companies' breakeven levels depend on their finance arrangements and fuel-hedging strategies.
There are 17 modern two-hulled tankers available for hire within the next 30 days, according to a report today from Paris- based Barry Rogliano Salles. Two months ago there were 40 such ships competing for cargoes, according to the shipbroker.
Bookings for VLCCs sailing from the Middle East to Asia account for 47 percent of global demand for the carriers, according to New York-based McQuilling Brokerage Partners LLP. Shipments to the U.S. and Caribbean, the second-biggest market, account for 14 percent of demand for supertankers.
Source: Bloomberg