GE Shipping, the country's largest private sector shipping company, is bringing down its exposure to the dry bulk segment to withstand the 93 per cent downfall in freight rate for such vessels. In the last three weeks, the Mumbai-based shipper has sold four of its dry bulk carriers, including a five-year-old vessel.
The company plans to sell two more of its dry bulk carriers and is scouting for buyers. "For the short term, it is definitely a negative outlook for the dry bulk carriers," said a company spokesperson.
Baltic Dry Index, the global benchmark for dry bulk carriers, is down by 93 per cent from an all-time high of 11,409 six months ago. This has led many shipping companies globally lay up ships and sell the old ones to ship breakers.
However, GE Shipping has sold its three old ships to small shippers and traders and not to ship breakers. The company sold each of the three ships, which were over 24 years' old, for less than $10 million (about Rs 50 crore). The five-year-old dry bulk carrier fetched around $25-30 million for the company.
The ongoing financial crisis and the resultant drop in economic growth have led to a drop in demand for ships, especially the dry bulk carriers used for transportation of iron ore, coal, steel etc.
"New freight contracts are at a rate which would not be able to even cover the operational cost of ships," said Amit Agarwal, analyst with SBI Capital Markets, a leading Mumbai-based investment bank and project advisor. "Once the old contracts lapse, companies are giving serious consideration to selling ships," he said. The company also sold one dry bulk carrier six months ago. Currently, it has a fleet of 42 vessels - 32 tankers and 10 dry bulk carriers - with an average age of 9.9 years.
Its total tonnage capacity is 2.97 million deadweight tonne.
None of the ships sold will be replaced in the near future. The company has an order book of 8 dry bulk carriers, which will be delivered from the second half of financial year 2010. "By then the demand for dry bulk segment would pick up," said the spokesperson.
Freight rate for the tanker segment has remained comparatively stable, while the dry bulk segment fell. The company also added one product tanker in its fleet last week.
"Shipping companies today want to rely less on the bulk segment; this is the reason they are bringing down their fleet," said Ramesh Singhal, chief executive officer, i-maritime, a Navi Mumbai-based shipping consultancy firm.
