Tanker freight rates soar in wake of Erika disaster

Date: 16/03/2000

By Bruce Barnard

THE Erika disaster has already had an impact on the tanker market, underpinning a sharp rise in freight rates as charterers spurn older ships and pay a premium for modern tonnage.

Freight rates for most vessel sizes, including supertankers, have surged by 25-40% since the end of 1999. A 130,000-tonner hauling crude from West Africa to the US was recently earning more than €33,000 a day compared with a 1999 average of around €16,000.

Charterers are even turning their backs on well-maintained older vessels operated by companies with which they have done business for years. There are reports too that some are trying to beat down rates for vessels with a technical certificate from Rina, the Italian classification society which passed the ill-fated Erika.

Large oil companies have become especially sensitive about safety and environmental issues. BP Shipping, for example, recently sent three tankers for scrap in China, passing up a better offer from Indian breakers following a Greenpeace campaign to improve their safety standards.

The turnaround in rates came just in time to save many owners from collapse following two years of weak markets, exacerbated by the decision by the Organisation for Petroleum Exporting Countries and its non-OPEC allies like Mexico last March to remove around 5 million barrels per day, or 7% of global supplies, from the market.

Tanker owners will have an eye on next week's meeting of the full Commission, which is expected to approve a raft of new safety measures. But most of their attention will be focused on Vienna the following Monday (27 March), when OPEC ministers will decide whether to boost production - and demand for tankers.

A large increase would take the sting out of any proposals from Brussels.