OPEC output cut may hit shipping cos

MUMBAI: Concerned with the steady fall in crude oil prices, the Indian shipping industry is waiting with bated breath for the outcome of OPEC���s all-important meeting on Wednesday.

Industry officials feel that if Organisation of the Petroleum Exporting Countries (OPEC) cuts production further, tanker rates could go into free fall, delivering a body blow to the domestic shipping industry that has half of its fleet in tankers. Tanker rates have already more than halved in the past one year.

���Yes, there would be a severe effect on the rates if OPEC brings production down further. The rates for VLCC (very large crude carriers) have already declined, although those of Suezmax, Aframax and other crude tanker segments are still quite firm,��� S Hazara, chairman and MD of Shipping Corporation of India (SCI), said. Suezmax tankers are smaller in size, and since they pass through the narrow Suez Canal, are named thus.

Tanker rentals have crashed from last year���s peak of $122,705 a day to $42,433 a day in the VLCC segment.

However, V Ashok, director of Essar Shipping Ports & Logistics, said: ���Freight rates for tankers generally firm up during winter due to increased heating oil consumption by the US and Europe. Accordingly, we have seen a spike in tanker rates in the past few weeks. The markets are likely to remain firm in the immediate future.���

The entire crude tanker business relies on OPEC production and any cut in output announced on Wednesday will hit the industry���s profits.

���The supply of ships has outstripped the demand for oil. With oil prices at record lows, production of oil has decreased, which, in turn, hurts the tanker business,��� an oil industry analyst said. At present, SCI has 39 oil tankers (including crude and product tankers), while Mercator Lines and GE Shipping have 10 and 32 units, respectively.