Shipping industry to benefit as oil prices drop

Abu Dhabi: The shipping industry is benefiting as oil prices continue to tumble in the global markets, ship owners and experts have said.
Operation costs of ships have gone down and demand for oil tankers have picked up as some countries like China try to stockpile oil taking advantage of the lower oil prices.

“This is having a positive effect on the shipping industry. We expect profits of companies to go up,” said Per Wistoft, chief executive officer of Dubai-based United Arab Chemical Carriers that operates a big fleet of tankers in the Middle East and the Indian subcontinent.
Oil prices have been sliding for the past few months. From a peak of $115 in June, prices have dropped to around $50 this week. Analysts have predicted the trend to continue till the second quarter of this year.

According to Wistoft, bunkering costs have almost halved since last year and the demand for oil tanker has gone up. Bunkering costs of very large crude carries also known as super tankers have come down from $40,000 per day to $20,000 per day. “This has been a substantial help for shipping companies to overcome the cost. Bunkering is one of the major expenses of the shipping companies.”

He predicted floating storage to increase due to low oil prices. Floating storage is a method by which oil companies hire large vessels to store oil and sell when the price increases.

[pullquote cite=”Sudai Jallad, owner of Bounty Marine Services” type=”right”]”The entire shipping industry is going to benefit.”[/pullquote]”The entire shipping industry is going to benefit,” said Sudai Jallad, owner of Bounty Marine Services. The capital utilisation to procure oil is much less than before due to falling oil prices, Bounty Marine Services that is involved in bunkering of oil said. “Buying of diesel has become cheaper due to the market situation. “The entire shipping industry is going to benefit,” said Sudai Jallad, the owner of Bounty Marine Services. He said they used to spend $80,000 for buying 100 tonnes of diesel earlier. “We now get the same quantity for $50,000. It is 40 per cent less.”

Meanwhile, an analyst said China is in an oil buying spree due to lower oil prices but it is unlikely to prop up global oil markets. “In this time of low oil prices, it comes as no surprise that China is stockpiling fuel,” said Daniel Ang, investment analyst from Phillip Futures. He added that China is one of the biggest consumers and importers of crude oil, and taking advantage of oil when prices are low is a strategic move.

“However, we see the big uptake of crude oil by China to not be reflective of China’s crude oil demand. These stockpiles would likely remain unused in the short term and thus, giving only an artificial boost on crude demand,” Ang said.

According to shipping consultancy Drewry, container shipping profitability is expected to improve in 2015, despite record vessel deliveries, driven by lower unit costs.

It said more carriers are expected to be profitable in 2015, provided that a number of tailwinds prevail. These include continuing carrier focus on vessel deployment; fuel costs remaining low; recovering demand; successful outcome of annual BCO (Beneficial Cargo Owner) contract negotiations; and new operational alliances delivering greater market stability.

By Fareed Rahman, Senior Business Reporter
Published: 18:33 January 8, 2015; Source: https://gulfnews.com/business/shipping/shipping-industry-to-benefit-as-oil-prices-sink-1.1438517