Lower Flat Rates, Higher Worldscale Rates in 2014

The time of year has come for the Worldscale Association to publish its schedule of nominal freight rates, “flat rates”, for port-to-port tanker routes. The flat rates are published on a dollar per metric ton basis reflecting the various costs associated with calling a particular combination of ports. The spot market convention of Worldscale rate is a percentage of the published flat rate that reflects prevailing market conditions of vessel supply and demand. The 2014 flat rates released this week declined year-on-year from those published in 2013. On a practical basis, the change in flat rates merely results in an adjustment of Worldscale rates in order to maintain voyage revenue parity. With this decrease in quoted flat rates, owners will be looking for higher Worldscale rates at the start of the New Year in order to keep their daily timecharter equivalents stable. Flat rates declined between 4%-6% from 2013 for the major routes as seen below, the first decline since 2010. Download here