Shipping cos set to cash in on dry bulk carrier biz

Mumbai, Apr 27 | Updated: Apr 28 2007, 08:26am hrs
Indian shipping companies are gearing up to make major investments in dry bulk fleet acquisition, as the boom in the dry bulk carrier business is expected to continue for the next couple of years. Shipping companies like GE Shipping, Mercator Lines Ltd (MLL) and Shipping Corp of India (SCI) are together investing over $500 million in the dry bulk carrier segment. According to S Hazara, chairman, SCI, A shortage of dry bulk carriers and port delays continue to increase freight rates, thereby creating a profitable platform for shipping companies. The dry bulk segment will remain profitable for the next couple of years. The Baltic dry bulk index, which is an indicator of the dry bulk carrier market, stood at 5,417 as on April 2, 2007, compared to 4,627 in April 3, 2005.

According to industry sources, Mercator has recently acquired 4 Panamax vessels for about $260 million. SCI is likely to acquire Capsize vessels, Handy Max vessels and Panamax vessels. GE Shipping (GES), on the other hand, has revitalised its dry bulk fleet by buying 3 modern Handymax ships (1997,2000 and 2003 built) and selling 3 old Handysize ships (1983 and 1997 built) in 2005-06. Recently, GES bought a modern (1996 built) Capesize in FY 2006-07, which was delivered in 2006-07 together with a geared Panamax (1994 built), which was also delivered in the same period. Recently, GES contracted to buy a second hand (1997 built) Handyman to be delivered in

FY 2007-08.

The dry bulk cargo market consists of major bulk commodities including iron ore, coal and grain and minor bulk cargo including steel, forest and agricultural products, bauxite and alumina, petcoke, cement, sugar, salt, minerals, scrap metal and pig iron.

According to a Mumbai-based shipping analyst, port congestion is the primary reason for the rise in the index. Waiting for berths at Brazilian iron ore ports and Australian coal ports (New Castle) has resulted in a reduction in active floating tonnage. Meanwhile, a change in trade patterns has also helped the dry bulk carrier industry. Reduced Chinese exports of thermal coal is forcing Asian countries to source their requirements from long haul territories, increasing carrier demand.