The Hindu Business Line : Great Eastern to increase dry bulk operations

WITH the freight market in the dry bulk sector likely to maintain a healthy trend in the coming months, Great Eastern Shipping, India's largest fleet owner in the private sector, is planning to enhance its focus on this segment.

At present, about 95 per cent of the company's exposure is in the tanker segment, with only five per cent being in the dry bulk sector. "Although our focus will continue to remain on the crude and product transportation business, we may slightly change this balance with more focus on dry bulk sector.

"We have not worked out definite numbers or schedules, but we would like to see the company's exposure to dry bulk sector increasing to 25 per cent," a senior company official told Business Line.

The company's fleet strength at present stands at 37 ships, with 29 of them being tankers and eight dry bulk carriers. Last fiscal, about 75 per cent of the company's revenue came from shipping and out of this 75 per cent was contributed by the crude/products business, with only 25 per cent coming from the dry bulk sector.

The company is in the process of adding two older handymax bulk carriers in the next two weeks - however at the same time, two of its existing ships, which are 1977 built, will have to be scrapped later this year.

The company's intentions to broaden its exposure to the dry bulk sector is understandable, as the freight rates in this segment, although having fallen by about 20 per cent from their recent highs, are still above their long-term average.

With the world sea borne iron ore trade projected to expand by 7 per cent in 2004 and Chinese import of this raw material slated to increase, the freight rates are expected to remain healthy in the coming months.

Indeed, the Chinese factor continues to be an important one for the world dry bulk shipping. China has taken over from Japan and Western Europe as the chief driving force in the dry bulk demand, with the country going in for a substantial increase in steel production and consumption.

"The steel industry is the most important industry for dry bulk demand, because seaborne trade in steel related products accounts for about 45 per cent of the trade in all dry bulk commodities. In 1995 China consumed about 87 million tones of steel, while Japan used 80 million tones and Western Europe 160 million tones. By 2003, China's consumption increased to a staggering 260 million tones, while that of Japan fell by 10 million tones," an analyst pointed out.

However, of late, an apprehension that China may slow down in the coming months has gripped the shipping industry, especially in the dry bulk sector. But, analysts point out, that there is no need for any apprehension.

"China will slow down - clearly a 35 to 40 per cent growth in raw material intake is not sustainable. I feel a slow-down in China is good news for the long term - a lot of froth will evaporate from the earnings (of the shipping industry), but they would remain at healthy levels for a longer period of time," pointed out an analyst.