The Upside of a Down Economy
The recent plunge in oil prices have a lot of people scared and feeling very cautious in Houston as well as other economies that rely heavily on oil exploration. Layoffs have begun. More are expected. The entire year of 2016 looks to be one of low price per barrel returns. But there is some good news in this for shipping costs.
Because transportation is so dependent on fuel and because ship lines pass these costs on to their customers, a falling price per barrel of oil translates into lower shipping costs. Bunker fuel, specifically IFO 380 bunker, is the type of high sulfur content fuel that ships burn. As of January 21015, bunker fuel prices are low. In fact, they are nearly 40% of what they were just six months previous.
Another factor that bodes well for lowered shipping costs is the ever increasing amount of TEU capacity. More and more container ships keep coming online. And they are coming online well in excess of older ships being mothballed. This oversupply is also another factor that will keep downward pressure on shipping costs
The last indication of low shipping costs is the almighty Baltic Dry Index. This index shows daily market rates for bulk ships. Bulk ships have no bearing on container ships. Thus the fact that shipping costs in this mode are down too shows a more general and universal decline in all areas of sea shipping costs. While the index is not at incredibly low levels, they are low in early 2015.
Whether you’d like to ship dry bulk, break bulk, or container cargo, call us. These rates will not remain low forever. As the economy picks up, supply on ships will decrease and the price of oil will return to normal levels.