Business Times 10 Dec 07;
Spill involves single-hull, lifting rates of double-hulls that cut risk of spills
(LONDON) The cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, may surge after a single-hull tanker was involved in the biggest oil spill in 4 1/2 years.
The carrier Hebei Spirit spilled 10,500 metric tons of crude off South Korea's coast. Owners of double-hulled tankers that cut the risk of an oil spill responded by asking for higher rates to lease out their vessels, Charlie Fowle, a director at London-based shipbroker Galbraith's Ltd, said by phone on Friday.
'If it's proven that a double hull would have avoided the spill, then I think it will have huge ramifications,' he said. 'Everybody will be clamouring for double-hulls.'
Owners may manage to lease their ships for more than 200 Worldscale points within the next several days, Mr Fowle said. That would be a 16 per cent gain compared with Thursday's benchmark assessment for shipments to Asia of 172.81 points, according to the London-based Baltic Exchange.
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 US 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 172.81 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about US$143,618 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.
Fuel Hedging Frontline Ltd, the world's biggest VLCC operator, recently said that it needs US$30,000 a day to break even on each of its supertankers. Companies' breakeven levels depend on their finance arrangements and fuel-hedging strategies.
Bookings for VLCCs sailing from the Middle East to Asia account for 47 per cent of global demand for the carriers, according to New York-based McQuilling Brokerage Partners LLP. Shipments to the US and Caribbean, the second-biggest market, account for 14 per cent of demand for supertankers.
The accident spurred gains in so-called forward freight agreements, or FFAs, that indicate the future cost of hauling crude.
Contracts for January climbed as much as 8 per cent while those for the first three months of next year advanced 7 per cent, according to Ben Goggin, head of tanker FFAs at SSY Futures Ltd in London.
'All my sellers from yesterday have turned buyers this morning,' he said on Friday. 'This could push rates much higher.' - Bloomberg
