Oil-Tanker Rates to Rise as Dry Bulk Drops, TMT's Su Forecasts

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

28 Feb 2008

The cost of shipping oil will surge while freight rates for hauling coal, iron ore and grains slump, said Nobu Su, the chief executive officer of Taiwan Maritime Transportation Co. Ltd. A dispute between Exxon Mobil Corp., the world's biggest oil company, and Venezuela may dislocate tanker markets and cause freight rates to almost triple, said Su, who's also the founder of the closely held Taiwanese trading company. At the same time, demand for iron ore may drop because of declining profitability among steelmakers, he said. ''Sell dry and buy tankers,'' he said yesterday in an interview in London. ''If you look at steel industry profitability, it has gone down. I think this is a historical moment.'' TMT made more than $1 billion buying coal and iron ore- freight derivatives in 2006, TradeWinds reported that year, citing unidentified people familiar with the matter. The company reversed that bet last year, according to the newspaper. Su declined to comment on the company's derivatives trading. Venezuela has threatened to halt crude-oil exports to the U.S. in retaliation for legal action launched by Exxon against the country's state oil company. Tanker rates, measured in the industry's Worldscale standard, would more than double to 300 Worldscale points if exports to the U.S. stopped, Su said. $284,649 a Day That equates to $284,649 a day for shipowners, according to a formula from Oslo-based shipbrokers RS Platou and marine-fuel oil prices compiled by Bloomberg. Owners currently make about $82,000 a day on the benchmark voyage to Asia at the present Worldscale rate of 115.63 points. TMT operates a fleet of about 10 double-hull very large crude carriers and plans to scrap its last two single-hull tankers this year because vessels with two hulls are safer, Su said. Brazil's Cia. Vale do Rio Doce, the world's largest producer of iron ore, said last week that Asian steelmakers agreed to pay as much as 71 percent more under annual supply contracts. Record prices for steelmaking raw materials are squeezing margins for makers of the alloy, spurring them to raise prices.