Gain for shipping players as Baltic Dry index touches 10-year high

With the Baltic Dry Index having hit a 10-year high recently, Indian shipping companies are not just benefitting from the high freight but also from increased trade with Bangladesh and Vietnam, industry professionals said on Wednesday.

“Construction activity has picked up significantly in Bangladesh while the country is concentrating on infrastructure growth. For this reason, Indian shipping companies are witnessing heightened cargo volumes with a lot of bulk raw materials getting shipped. That is going to be considered a long-term craze as infrastructure press is expected to continue,” Captain Rahul Bhargava, chief operating officer (COO) at Essar Transport, told Business Standard.

Shipping Company of India (SCI), Great Eastern Shipping, Tolani Transport, and Essar Shipping will be into bulk carriers along with other segment fleets in the household market place. “All vessels on place charter will earn more and most companies keep a combo of place and contracted vessels. Hence, the power would vary depending upon the portfolio,” said Anil Devli, chief executive officer (CEO) at Indian National Shipowners’ Association.

Another trade route, which has strengthened for India, though a seasonal one, is usually the export of rice to both Bangladesh and Vietnam.

“Export of rice provides emerged as a new business for domestic shipping companies in the last handful of weeks. We've already shipped near 200,000 tonne rice to Vietnam and Bangl­adesh and another 150,000 tonne will be shipped in the near future. This trend, nevertheless, is likely to be short-resided and would previous for another two months. But it’s a new commodity for domestic shipping companies,” said Bhargava.

Meanwhile, with China switching its trading partners due to geo-political iss­ues, increased trade with South Africa for bauxite and with the US for coal is also auguring well for vessels with tonne miles going up.

China earlier imported coal from Australia but has switched to the US for the fuel, leading to increased tonne mile. That is also another reason for the index to move up, said industry insiders. (see chart)

Among domestic transport players, it's the better deployment of Kamsarmax and Supramax vessels that yields good earnings for companies.

“Kamsarmax is the recommended vessel for bulk transfer at present and a lot of bauxite gets transported by domestic delivery corporations. These vessels are getting well used in South Africa,” explained an industry executive.

Both Great Eastern Shipping and SCI have Kamsarmax as part of their fleet.

Meanwhile, Supramax vessel freights contain nearly doubled to $5,000 per tonne from $2,500 per tonne on the Indonesia-India route. That is auguring very well for domestic shipping corporations, said industry executives.

“Global trade, despite the pandemic, is secure. It is stable, not good. Also, the upsurge in index is because many global shipping companies have gone bust. So, there is a shortage of vessels which is certainly travelling the index up,” said Hitesh Avachat, group mind of corporate ratings at Health care Ratings.