French orders to foreign shipyards

The
tanker
market
in 1999 Crude
• As foreseen in our previous annual report, a very sharp
drop in freight traffic characterised 1999. All cargo sizes
were affected - one year ago it was difficult to imagine
how wide the effect of this crisis would be.
• The market for petroleum transport remains (too?) largely
unregulated and the law of supply and demand sometimes
results in extreme consequences such as those observed
this year.
• We will first cite the changes occurring recently in the
market, and then attempt to explain their principal
causes. We will conclude by evoking grounds for hope to
shipowners in the coming years.
Recent changes in the market
An analysis of freight rates over the last two years is sufficient
to illustrate how extremely volatile our market actually is,
as well as to outline the difficulties of shipowners to predict
returns on their investments in the short and medium term.
The Worldscale (WS) rate of VLCCs has continued to
register an overall drop. The fall has been particularly
oil transport
“Annus horribilis”
sharp since the beginning of the year, especially since March.
In 1998, the average WS rate was 59.4; it has dropped
19% this year, to a rate of only 48.2.
Daily earnings have fallen, from an average of $30,675
to 18,928 this year, a more than 38% decrease. This is
due to a very strong rise in fuel prices.
Here again, while 1998 was generally positive for
Suezmax shipowners, with an average WS rate of 82.5
and daily earnings of $20,150, in 1999 these rates were
sharply reduced. Average rates for the year are only 73.5
and $14,370/day TCE, a lowering of WS rates by 11%,
and of daily earnings by 27%.
Contrary to the two previous tables, WS rate variations
for Aframax are smaller. From an average of 94.7 in
1999, the rate fell to WS90.2, a loss of 4.75%. With the
very strong increase in fuel prices, yields are much more
affected: daily earnings of $13,200 in 1998 have gone
to $10,323, a loss of nearly 22%.
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