Mumbai, March 25: Shipping companies are likely to reap a windfall as freight rates skyrocket due to the war in Iraq.
Tanker freight rates, which were pegged close to $ 15,000 per day some four months ago, are now as high as $ 45,000, industry officials said. Analysts expect prices to harden further unless there is quick resolution to the war.
K. M. Joseph, executive director of the Shipping Corporation of India (SCI), said: “While the Iraq war is one of the main reasons for the surge in freight rates, the other factor was a tanker spilling oil near the Spanish coast.” Thus the ban on single hull tankers have fuelled a demand for younger fleet, industry circles said.
This had forced the Spanish government to insist that only young tankers enter its seas. As a result, the demand for young tankers (maximum age of 15 years) across the globe has sizeably increased, he added.
For companies like the SCI, the new norms have come at the right time as it has a younger fleet of tankers in the age group of 5 to 15.
While shipping companies like the SCI will profit from the buoyancy in Baltic freights, it also has to honour existing contracts with oil firms. Joseph said the SCI has contracts with PSU oil majors BPCL and HPCL where the rates are fixed and not floating.
However, Indian Oil, a major oil canaliser in India, does not have any such pre-existing contracts and therefore it has to pay as per the prevailing market rates, he added.
While the war has heightened fears in the industry, an LPG tanker from the SCI will be sailing shortly for Kuwait to reach the Gulf port by March 29.
SCI has opened a 24-hour crisis control room at their headquarters. It has seven tankers deployed for the south Asian ports.