Current bunker prices suggest that next year’s Worldscale flat rates will increase by around 9-10% on long haul voyages and by 6-7% on short haul routes, a leading broking house said.
Since 2009, we have seen large scale fluctuations in Worldscale flat rates. On long haul voyages, flat rates have increased over the past two years by around 20% per annum, said Gibson Research in its latest weekly report. Even bigger changes were seen in 2009 and 2010, when flat rates on long haul routes first jumped by nearly 40% in 2009, but only to fall by around 25% during the following year. These sizeable fluctuations have been driven by the extreme volatility in oil prices and hence changes in bunker prices, Gibson said. Most notable swings were seen in 2008, when international bunker prices first surged to over $700 per tonne in mid-2008, but then fell to less than $250 per tonne at the end of the year. However, since early 2009, bunker prices have been on an upward path. By September last year, prices had nearly trippled from levels seen in late 2008/early 2009 (hence the tanker industry witnessed the large scale increases in Worldscale flat rates in 2011 and 2012). The question now is what is going to happen to flat rates next year? Are we going to see a similar magnitude of changes once again? As the bunker element that goes into the flat rate formula is based on prices between October and September each year, we already have nearly 10 months of data that will go into 2013 calculations, Gibson said. Earlier this year, bunker prices increased further, jumping close to $750 per tonne in March 2012 (above the peak level seen back in mid-2008) amid oil supply concerns and geopolitical tensions, primarily on the back of the Iranian developments. On its own, this may suggest that we would see a similar rise in Worldscale flat rates next year, Gibson said. However, bunker prices fell in the second quarter to below $660 per tonne in June, as the market concerns shifted towards the increasing weakness in the global economy. More recently there has been a rebound in oil prices and cumulatively over the past 10 months bunker prices have averaged 14% higher than during the corresponding period last year. Furthermore, if we assume that bunker prices will remain around current levels in August and September, this suggests that in 2013 Worldscale flat rates will increase by around 9-10% on long haul voyages and by 6-7% on short haul routes, the broker forecast.This is a smaller increase in flat rates seen during the previous two years. Nonetheless, it is still significant and the general trend in nominal rates remains the same – upward, Gibson concluded.