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| India's shipping industry, particularly the big three companies -- Shipping Corporation of India, Great Eastern Shipping and Essar Shipping, have a huge exposure to the sector. India imports about 70 per cent of its crude requirement, while the balance 30 per cent is met from local resources. |
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| Also, the rates for Suezmax carriers fell about 40 per cent to $36,500 per day in June from $50,900 per day in March. Similarly, freights of Aframax carriers have fallen about 43 per cent from $53,740 per day in March to $30,750 per day in June. |
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| The major reason for falling freights is the end of the Iraq war. "The US and the European countries had been piling up crude in anticipation of war and the attendant expected disruption in supplies. |
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| Further, Iraq had stopped pooling its supply with the rest of the Organisation of Petroleum Exporting Countries (OPEC) countries leading to a demand-supply mismatch, thereby driving up freight rates. The uncertainty had also allowed shipping companies to charge higher freights. |
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| However, with the end of the war the stockpiling has stopped. Also, since the uncertainty had disappeared, shipping companies were unable to charge a premium, industry sources said. |
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| The shipping industry, however, expects the trend to be reversed in the next few months. |
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| "Global crude tanker freights have come down from the very high levels prevailing in March, while the product market has remained firm. However, crude inventory in the US are at record lows and this will result in the upward movement of freights in a few months," said Bharat Sheth, managing director, Great Eastern Shipping Company. |
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| "Crude rates will stabilise at the existing levels for sometime. However, once the stockpiling for winter starts the freight levels will increase," said P K Srivastava, CMD, Shipping Corporation of India. |
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| Industry sources also pointed out that the current fall should be seen as a correction and not as a sign of troubled times in the industry. Freight rates had skyrocketed from $12,500 per day last year to about $70,000 per day in March, 2003. |
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| This was due to a combination of factors like the traditional winter demand, the strike in Venezuela's oil industry, the closing down of nuclear power plants in Japan and the impending Iraq war. |
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