Shipping biz choppy despite freight recovery

Written by Rupsa Ray | Mumbai | Updated: Mar 31 2009, 06:08am hrs
Despite the Baltic Dry Index, a key indicator of global dry bulk freight rates, showing some recovery, Indian shipping companies do not expect to see any major improvement in the future. The index on March 19, went up to 1,758 which is considered very high compared to its low of 660 in the first week of December. But the surge was lower than the figure of 2,298 on March 10.

According to industry experts, fluctuation in freight rates will keep taking place as the global economy is yet to recover.

Though there is some amount of normalcy as compared to December, no dramatic shift in volumes or transport movement has taken place.

Fluctuation is inherent in the shipping industry, but 1,700 is still low, said Sabyasachi Hajara, chairman & MD, Shipping Corporation of India (SCI). The dry bulk market is still in a weak state and we do not expect any major improvement in the immediate future. However, it is unlikely that the figures will go down as low as it was in December. The tanker market is difficult to predict, but I dont think there will be any major improvement as well, he added.

Hajara said that shipping companies can now cover margins at the most, but cannot break even.

One reason for freight rates going up is that China has again started importing iron ore. Moreover, the commodity prices are also becoming more stable as compared to the drastic drop during October-December.

As compared to October-December 2008, the commercial system is getting better and commodity prices are becoming more stable, hence we see the improvement, said Yudhistir Khatau, MD, Varun Shipping. However, in the immediate future, how much it is going to improve is difficult to gauge, as the whole environment is still unstable, he added.

According to experts, the Indian shipping industry is better off, in terms of employability and engagement of ships. The Indian economy is in a better position compared to other world economies and Indian shipping companies have a better access to the countrys trading community.

There is no doubt that the Indian shipping industry is equally hit due to the economic slowdown. But in terms of employability, its in a better position. There is lesser number of idle ships for Indian companies as compared to international companies, said Hajara.

With so many stimulus packages being announced globally, there may be some recovery in the economic situation, which may lead to improvement in freight rates as well, feel experts.