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Amit Mitra

SLUGGISH trends continue to sweep the international shipping freight market, especially in the tanker segment. And with the Paris-based International Energy Agency (IEA) making a downward revision in demand forecast for the first time in many months, the shipping industry does not anticipate the freight market to gain any significant momentum in the weeks ahead.

Based on the spot market reports from different quarters, analysts point out that in the Very Large Crude Carrier (VLCC) segment, the spot rate fell from an average of $73,833 per day in February and $44, 062 in March to $39,153 on April 15 and $36,874 on April 20. Last April, the VLCC rate was upwards of $45,000 per day.

Similarly, in the Aframax segment, the spot rate fell from an average of $32,952 per day in March to $22,530 on April 15 and $18,976 on April 20, while in the Suezmax segment it fell from an average of $46,300 in March to $33,215 on April 20. In the dry bulk sector, however, the downtrend is not that sharp. For example, the Baltic Dry Index, which averaged 4,680 in March, rose marginally to 4,835 on April 15, before falling to 4,620 on April 20.

The IEA, which had raised the global demand forecast by 300 kb/day to 84.3 million barrels per day, has in its April report revised downwards the oil demand forecast by 50,000 barrels per day. The Chinese demand growth also slowed to 5.4 per cent in the first two months of 2005 from the breakneck 21 per cent growth recorded a year ago.

World oil supply had rebounded only in February last from diminished levels in January, rising 3.65 lakh barrels per day to 84.2 million bpd. While non-OPEC output rose 50,000 bpd to 50.4 bpd, OPEC dominated the increase, accounting for 3.15 lakh bpd of the increase. The IEA report however pointed out that there seems less reason for concern, regarding oil market fundamentals that earlier in the year.

However, shipping companies are bullish about the outlook for the coming months, anticipating an increase in oil demand and China's economic growth "Everybody is looking to China with wonder. China is keeping the world busy by importing huge amounts of raw materials and other products. Chinese charterers are expected to play a major role in the coming years, as China plans to increase its crude oil refining capacity by 52 million tonnes per year to reach 332 million tonnes by 2010," said a shipping industry analyst.

On the basis of these projections, shipping companies do not appear to be flustered by the slight correction in the freight market. "We expect the market to remain steady in 2005. We also feel that there will be substantial investment by Indian companies in tonnage acquisition in the course of the next few months," an official with a shipping company pointed out.

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