Ups and downs of freight rates
The energy crisis as well as the decline in consumer and business confidence are setting new standards in international shipping markets, increasing transportation costs for cargoes of oil and refined products and reducing them for container movements. At the same time, rates in the dry bulk freighter market are being pressured by signs of a global economic slowdown and declining industrial production.
The swings have been dramatic lately, pointing to a rally in tanker revenues, a deep correction in container ships and a relatively muted drop in trucking. Although for European importers the drop in transport costs for finished goods such as white goods and electronics from around $15,000 a container last year to $5,000 today is expected to help lower final prices for consumers, the rising transport costs of oil come on top of its market rally.
Since February, when Russia invaded Ukraine and it became clear that the transport of crude oil as well as refined products would have to come from markets further away, all types of tankers have seen their daily revenues rise from levels of $5,000-10,000 a day to the $60,000 range today. In fact, in the spring the rates for some tankers (Aframax) reached or even exceeded $90,000 per day.
Along with crude carriers, the daily revenues of refined product carriers have been boosted, as Europe and other markets are now forced to transport refined petroleum products from markets further afield. And the more distant the market, the more days a ship needs to travel and thus limits its availability – i.e. supply. With demand strengthening, and due to stockpiling, freight rates have more than quintupled and together they have dragged ship prices much higher. It is typical that, according to shipping companies, tankers over 15 years old are being sold today at prices almost twice what they were a year ago.
A starkly different picture is painted by the container ship market: In just a few weeks, container carriers have seen a dramatic decline, falling sharply but after a prolonged period of extraordinary and unprecedented highs.
