London, 7 June (Argus) — Tanker owners confronting persistently low freight rates that have pushed the industry into losses, asset sales, restructuring, and bankruptcy protection, are now demanding prompt payment from charterers, and more transparency from brokers.
“Our complaint is not the low freight rates” said Bill Box, a senior manager with tanker owner and operators' association Intertanko, although on many routes they do not cover daily operating costs.
Their complaint is the practice of some charterers of delaying freight payment by five to 10 days. Tanker freight payment is due on discharge, at which point an owner can already have outlays of $5mn. “By paying 10 days late, owners are giving charterers millions of dollars of free credit” said Box. “This is basically adding insult to injury. It's nothing other than wilfully delaying”.
By contrast, in the dry bulk market - also suffering sustained low rates - freight is paid during the voyage, allowing owners to better manage their cash flow.
Late payment of demurrage is also hurting owners. Charterers typically have 90 days from submission of a demurrage claim to challenge it. But some charterers wait until just before day 90 and then challenge a small aspect of the claim, enabling them to delay payment. Some claims worth hundreds of thousands of dollars take 12 months to settle.
Intertanko is meeting with brokers, charterers and insurers to formulate a code of practice. “We will not be asking them to change terms of the charter party - just stick to them”, Box said.
The low freight rates are driven by lacklustre oil demand growth and oversupply of vessels. But they are also a symptom of lack of transparency in the market, according to Box. Brokers have a role to play in improving this, said Box. The loyalty of most brokers is to charterers, because it is charterers who appoint them. But owners rely on brokers to build a picture of what is happening in the market. “They should be clear and transparent and doing the best they can in adding value”, said Box.
Owners have few further option for cutting costs if they wish to keep their ships employed. “Quality of management is not going to go down, because as soon as you let it fall you will not be acceptable in the market. You have to keep spending at 100pc, maintaining a first class operation until the money runs out - as it did with OSG”. OSG was the largest US tanker operator before filing for Chapter 11 protection from creditors in November 2012.
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