Platts: Freight Rates Pressured by Falling Bunker Fuel Prices

Falling bunker fuel prices are putting downward pressure on freight rates for dry bulk and tanker vessels operating in Northwest Europe, Platts quoted market sources as saying.

As bunker prices account for 70% of the cost of operating a dry bulk vessel, any significant changes in fuel prices will have a knock-on effect on freight rates.

Freight rates Panamax coal route from Ventspils, Latvia, to Rotterdam, basis 70,000 mt, were assessed Thursday at USD 6.25/mt, down 25 cents from Wednesday.

According to Platts, the drop came despite tighter tonnage list in the UK Continent and a generally positive sentiment in the Atlantic Panamax market. Industry sources said the lower rates are not the result of supply and demand fundamentals, but are the result of falling bunker prices in the Northwest Europe.

The prices have fallen to their lowest in over a year and are expected to continue to slide throughout the quarter. Since November 2013 when the price of bunker fuel amounted to slightly over USD 1400, prices  fell to around USD 1,180, as was last reported mid-October, according to Bunker World data.

“Bunker prices out of Rotterdam fell to USD 445.40/mt Thursday, the lowest level since September 29, 2010, when they were at USD 437/mt. This has driven down costs for vessels which plying this route, as they typically will ballast to the Baltic from UK, loading bunker fuel from Rotterdam, the regional bunkering hub,” Platts said.

Platts quoted a source saying that in the last 15 days, 380 CST HS bunker fuel prices fell off by USD 100/mt.

On the other hand, time charter rates on trans-Atlantic round voyages rose last week from USD 5,000/d to USD 6,500/d on Friday.

“This is mostly due to increased activity and healthy demand. The effect of weaker bunker prices is mostly being felt in the spot voyage deals and is yet to show up in the time-charter market segment,” Platts said.

The falling bunker prices also could affect freight rates in the dirty tanker market, although so far any impact has been muted, Platts’ shipping sources stressed . The main market to see a drop in rates on Thursday was the Mediterranean Aframax sector, where rates on the cross-Mediterranean route, basis 80,000 mt, fell 5 Worldscale points to w100.

Source: Platts; Image: Auro Maritime




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