Buoyant bulk trade lifts local shipping majors

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

30 Oct 2007

With global transportation of grain, iron ore and coal increasing by the day, dry-bulk freight market is on fire. Indian shipping companies have reaped huge benefits during the last quarter, as the Baltic Dry Index (BDI) continued its northward journey, and rose above the 10,000-mark, creating a history in the second week of October. BDI is a composite of global shipping rates for dry-bulk commodities such as grains, coal and iron ore, and is seen as a key indicator of global demand and commodity pricing levels. Last week, GE Shipping said in its market guidance that the ongoing boom is likely to continue in the medium term as well on the back of strong global GDP growth. ''Demand for commodities from China and India is likely to keep rates well above in the foreseeable future,'' it said. The largest private shipping company has benefited hugely from the dry-bulk boom as the rates continued their extraordinary northward journey on the back of strong demand for iron ore, coal and other minor trades. ''During last quarter (July-September), supply-side constraints led to significant port congestion at some major loading areas and this further fuelled the already buoyant markets,'' said the company. Higher freight and charter hire in dry-bulk and gain on sale of ships had helped GE Shipping post 36% increase in total income at Rs 800 crore during the quarter ended September 30, 2007. Net profit went up 46% at Rs 340 crore. ''The key factors responsible for the growth has been an increase in the revenue days, the doubling of dry- bulk rates and the fact that the company had a large part of its fleet on period charters, which helped it minimise the impact of the sharp drop in tanker freight rates on its earnings,'' according to a company communique. Mercator Lines (MLL) is sitting pretty with its over 40% exposure to the dry-bulk sector. ''Dry-bulk segment provided most of our profits in last quarter since the tanker market was at a low ebb. Next two quarters are going to be good,'' said a senior official. Mercator has 10 tankers and 12 bulkers, and another 3 tankers on charter, between its Indian and Singapore operations. Mercator's operating profit moved up to Rs 72 crore during second quarter, from Rs 64 crore in the corresponding quarter last fiscal, despite total income fell to Rs 198 crore from the earlier Rs 222 crore. Its net profit moved up from Rs 22 crore to Rs 28 crore during the last quarter. The company is going ahead with the initial public offer (IPO) of its Singapore subsidiary. “The IPO will hit the market in November,'' said the official. Indian shipping companies have continued to expand their fleet over the last few months. During the quarter, GE Shipping, for instance, contracted to buy a 2001-built Supramax dry-bulk carrier and to sell 1988-built single hull Aframax tanker 'Jag Labh' and 1986-built Aframax tanker 'Jag Leher'.