Bunker Price-Tag Rockets By $5-$10, Shippers Curbed
Global prices of bunker, the fuel used in ships, has shot up by $5 to $10 per tonne in the wake of the terrorist strikes in the US.
Shipping industry officials said the development may have some impact on the margins of Indian shipping companies, but added it was too early to predict anything.
Bunker is a derivative of crude oil, but despite crude prices recovering to $28 per barrel on Wednesday afternoon from $31 per barrel, bunker prices remained northward bound.
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The three major markets for bunker are Port Said in Egypt, Rotterdam in Netherlands and Singapore.
"The spurt in Singapore prices were maximum. Bunker prices closed at $153 per tonne on Tuesday but were up to $162 per tonne on Wednesday. The Singapore prices were not only influenced by the attacks in the US but also hoarding on the part of traders," said a senior official of Shipping Corporation of India (SCI).
Industry sources pointed out that bunker prices which had closed at $139 to $140 levels in Port Said and Rotterdam on Tuesday were ruling firm at $145 levels on Wednesday.
Analysts however pointed out that the flare up in bunker prices could prove to be a short term phenomenon and were not unduly alarmed.
"It is usual for bunker prices to move up when crude prices move up. Prices also rise in such panic situations. The further movement of crude prices will be entirely dictated by the future course of events. If Osama Bin Laden is indeed proved to be the culprit behind the strikes, and the US attacks Afghanistan, then there is little cause for concern. On the other hand if there are US attack in the Gulf, then prices will be up sharply," said K Ramachandran, head of research, Tata TD Waterhouse.
"The service between India and the US will be temporarily affected but there will be no lasting long term impact," SCI chairman and managing director, P K Srivastava.
Other industry observers have expressed concern on the overall macro economic environment following the attacks.
"There is already a slowdown in the US economy and the strikes have compounded matters further. If this slowdown get accentuated because of these strikes then the shipping industry will be affected globally. At the moment, it is hard to say which way things will go," said a senior official with the Indian National Shipowners Association, the apex body of shipping lines.
Cloud over oil sector
The Indian oil industry is facing a very uncertain situation with crude prices zig-zagging. The crude quoted at $31 a barrel on Wednesday morning crashed to $28.05 a barrel by the end of the day.
Analysts said that there could be further such price spirals. Karthik Ramakrishnan, a senior analyst with Sunidhi Consultancy Services said, "It is too early to react to oil prices going up. There is a general cautious approach as it is uncertain how the US government will retaliate to the spate of attacks."
The dominant mood in the industry is to adopt a wait and watch approach. Any price hike will mean further increase in oil pool deficit. An increase of one dollar will translate into a oil deficit of another Rs 500 crore (on an annualised basis).