Maritime Newsletter

Shipping rates sail south, hit bottom lines - 2010-07-05

Shipping companies are once again headed for a tough time, as the freight rates for dry bulk carriers fall. The Baltic Dry Index, the global benchmark for the freight rates of such carriers, fell 40 per cent to 2,501 on Friday against 4,209 a month earlier, as China takes steps to cool its inflation by bringing down production. Private companies like Mercator Lines, GE Shipping and Essar Shipping are insulated from this drop in freight rates to a large extent, as their ships are largely on long-term contracts. Mercator, with 16 bulk carriers, has about 80 per cent of it on long-term contracts of over a year. That largely insulates it from the current fall in rates. Its stock was up by 4.8 per cent to Rs 46.5 in the past month. Similarly, GE Shipping, with six dry bulk carriers out of 35 vessels, has the impact limited to only four of the former. The stock of the company rose 4.2 per cent to Rs 295.8 a share in the past month. Essar Shipping has its seven dry bulk carriers on a long-term contract of over three years and that has protected it against the sharp fall.Source: Business Line