Freight rates for shipping commodities into India from countries requiring a voyage period of less than 14 days is expected to see a huge spike after the country’s maritime administration said that ships arriving from ports of Coronavirus infected countries identified for mandatory quarantine would have to wait outside the port till the two week period ends before allowed to unload cargo.
“Fleet owners will budget it and the cost of transportation will go up exponentially,” said an executive with a local shipping company. “They will budget in the extra costs to comply with the 14 days requirement, which he would otherwise have completed in 5-7 days and go on to the next trip, to compensate for the freight lost,” he stated.
For India, lot of commoditised shipments comes from South East Asian countries which are typically short-haul trades with voyage time of 5-7 days.
So, compulsorily the ships will have to wait on the high seas for the extra 7-9 days before it can come to the port to comply with the 14-day rule since leaving the previous port.
India imports about two-thirds or 65 per cent of its crude oil and about 90 per cent of liquefied petroleum gas (LPG) annually from the Middle East, where the voyage time is about a week to India’s West Coast and a little more to the East Coast.
“Indian entities hiring ships will have to pay more freight on all cargo types. It’s up to the ship charterers whether they want to pass on the higher rates to the end use consumers or not,” the executive said.
Shipping is one of few industries on which the epidemic has had a positive impact. “Tanker rates have gone up 5-7 times as the epidemic spread; it’s a big positive for fleet owners,” he stated.
Freight rates for moving crude oil have also jumped since early March in the wake of the huge price cuts unleashed by Saudi Arabia, the world’s top oil producer, following a spat with OPEC + member Russia over production cuts.
“Because of glut in oil due to price cuts, there is a huge amount of excess oil floating around. Oil is such a thing, if it comes out of a refinery, it needs to immediately go somewhere. Given the very limited land storage available, the oil has to go on a ship- either to transport it or just store it on a ship, even if it has not been sold. That’s why the demand has gone up for tankers because lot of tankers are used for storage needs. That’s why there is a big jump in freight rates,” the executive said.
The sport rates for shipping crude oil on very large crude carriers had touched a day rate of $260,000 four days ago, while Suezmax rates had reached day rates of $120,000. While Aframax tankers are being fixed at $40,000-50,000 a day and product tankers at $20,000 a day.
On March 3, when Saudi Arabia took the market share fight to Russia, oil super tanker rates were hovering between $25,000-30,000 a day, Suezmax between $18,000-20,000 a day, Aframaz at $16,000 a day and product tankers at $14,000 a day, according to shipping market sources.
