“There have been very few inquiries already and even out of those, most were not firm. Out of five inquiries, three have failed,” said a ship-owner, on condition of anonymity.
“The charterers are fixing rates and then trying to trade the cargo. Freight is low enough, but still charterers are not able to sell the cargo,” he added.
The Baltic Dry Index measures change in transportation costs of raw materials such as metals, ore, coal, grain and fertilisers by sea. The index has been on a continuous fall since August following China's economic data, which actually set the strong bearish tone for the bulk trade market not just in the Asia Pacific region, but across the globe.
China being the world’s largest importer and exporter of several commodities, a slowdown in its economy indicates grim trade climate across world.
“Interest in fixing freight contracts for a longer period is absolutely absent from the charterers’ side,” said a ship-charterer for a steel company. “No charterer wants to lock in freight at a premium to spot price as they see little upside over this year,” he added.
Supply of vessels on water is outnumbering demand from cargoes, said industry officials.
“The ship-owners may have to consider laying off some of their vessels to stem the slipping freight rates,” said the ship-charterer.
Throwing light on the India-specific trade scenario, industry officials said that that higher coal supply in domestic market, iron ore export market being completely out of picture due to the ban on exports and a diminished fertiliser trade have all left small-sized Supramax and large-sized Capesize vessels completely idle, pushing even the ancillary industry out of job. The ancillary industry caters to the Capesize vessels as these ships by virtue of their size need constant maintenance.
Traditionally, coal was imported in India via Capesize vessels, which was then loaded with iron ore for exports. This would keep the vessels occupied both ways. Since the ban on iron ore exports, it has been quite difficult for charterers to bring in large sized vessels. “Now, with such a business climate, usage of such large vessels is ruled out completely,” said Kamat of Link Shipping & Management System.
Baltic Dry had hit an all-time high of 11,793 on May 20, 2008. Since then, the index has been very volatile and in fact has been in trough for a longer-than-stipulated period.
Shipping is a gamble and one cannot say when things will look up. It is all about being optimistic in the business, said industry officials.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.