The Hindu Business Line : Shipping stocks maintain good run

SHIPPING stocks maintained their good run on the bourses given that the sharp surge in freight rates, particularly in the wet bulk (tankers) sector, continues unabated.

Dry bulk rates that hit an all-time high almost a month ago, are ruling steady.

The stocks of shipping companies with VLCCs (very large crude carriers) such as Great Eastern Shipping, Mercator Lines and Essar Shipping have witnessed sustained support during the last two weeks.

"Winter demand accelerating and the US strategic reserves at an all-time low have put an upward pressure on demand for oil and thus transport of oil by tankers," reasoned a senior analyst with a domestic brokerage.

Analysts said freight rates in this segment doubled more so after Thai Oil, a subsidiary of Thailand's State oil conglomerate, fixed a VLCC for October 15 to bring crude from West Asia for an unprecedented rate of $1,06,000 per day.

"This set the floor and rates just kept on moving up," an analyst tracking the sector pointed out.

Industry sources maintain that while the spot market rate for VLCC stood at $42,718 per day on September 1 this year, it spurted to $ 82,807 on October 4. In fact, the average rate during the second quarter of the last fiscal was only $26,472 per day.

Increases were also reported in the other segments in the tanker sector - from September 29 to October 4, the rate in the Suezmax tankers increased from $64,968 to $73,883; in the Aframax segment, it rose from $38,666 to $73,883.

"The rising crude prices augur well for companies having VLCCs and tankers. And as more and more oil is discovered in the deep seas, we will need more ships to carry the crude from the point of production to refineries. Another factor has been the growth in demand for oil in China, which is expected to grow by 8.15 per cent or 5,10,000 barrel per day by 2005, going by reports of the International Energy Agency in Paris," an analyst pointed out.

Industry sources maintain that Chinese demand for oil has spurted in recent weeks due to stoppage of oil by Yukos, Russia.

It is not only the VLCC and tanker owners that are witnessing a positive trend on the stock bourses. Companies in the dry bulk segment, such as Shipping Corporation of India, also benefited from the galloping freight rates.

While the Baltic Dry Index stood at 4,130 on October 4 as against 3,372 on the same day last year, the Baltic Handymax Index touched 27,623 on October 4, as against 16,568 on the same day last year.

The stock of SCI ended at Rs 170.30, up 4.45 per cent, with around 8.86 lakh shares traded on the BSE. Essar Shipping closed at Rs 26.90, up 1.89 per cent, with around 17.36 lakh shares traded, while GE Shipping ended the day at Rs 181.10, up 2.66 per cent, with around 4.45 lakh shares traded on the BSE. The stock of Mercator Lines ended at Rs 611.70, up 4.97 per cent, with around 48,125 shares traded.

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