Business Daily from THE HINDU group of publications
Thursday, Aug 03, 2006
Business Daily from THE HINDU group of publications Thursday, Aug 03, 2006 |
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Financial Performance Logistics - Shipping Shipping cos post lower net profit in Q1 Amit Mitra
Outlook With changing trade routes, freight rates may harden, especially in the tanker segment Dry bulk segment is also seen firming up as US steel and cement imports surge due to re-building activity Oil prices, interest rates could be dampener to an extent across all segments
Mumbai , Aug. 2 Relatively softer global freight rates, spiralling bunker prices and higher interest and depreciation costs are some of the factors that watered down the net profit of Indian shipping companies in the first quarter of this fiscal, as compared to the corresponding quarter of last fiscal. Industry analysts however say that with the changing trade routes, involving long haul transportation of oil between the US and West African coasts and Venezuelan oil increasingly flowing to China, freight rates may harden in the coming months, especially in the tanker segment. Essar Shipping recorded the biggest dip of 67 per cent, with its net profit falling to Rs 36.9 crore, as against Rs 110.3 crore in the corresponding quarter of last fiscal. It is followed by Mercator, which recorded a fall of 56 per cent - to Rs 18.30 crore from Rs 41.90 crore in the first quarter of last fiscal. Similarly, GE Shipping's net fell by 22 per cent, Varun Shipping's by 12 per cent and SCI's by 34 per cent.
Contributing factors
One of the reasons for the fall is the increasing cost of bunkers. Analysts say there had been a 31-per-cent increase in cost of bunkers from the first quarter of last fiscal to the first quarter of the current fiscal, which hit vessels on spot voyages. Then there was the relatively low freight rate. The freight rate in the tanker segment started off on a weak note at the beginning of the last quarter, but it did subsequently pick up towards the end. Industry analysts ascribe this to the recovery of refineries after their seasonal maintenance, aided by a strong demand push by gasoline and jet fuel. With vessels being used as floating storages by some producing countries, a reduction in available tonnage resulted in the rise in freight rates towards the end of the quarter. The average rates were however still lower as compared to the first quarter of last fiscal. For example, crude carriers earned an average Time Charter Yield (TCY) of $26,582 per day, as against $26,922 per day in the first quarter of last year.
Dry bulk segment
The worst hit was the dry bulk segment. Here shipping companies registered an average TCY of $15,487 per day, as against $22,590 per day in the year-on quarter, reflecting a dip of about 31 per cent. Analysts however say even in the dry bulk segment, there are positive indications of the market firming up from these levels in the coming months. The projection is made on the back of a surge in US steel and cement imports due to re-building activity after the devastating hurricanes and the increasing grade trade, especially Brazilian soyabean exports. Further, with India reducing iron ore exports to China, there has been a shift in the trade route from Brazil, resulting in higher tonne-mile demand. The Baltic Supermax Index, which was at 1,768 on April 3, rose to 2,326 as on July 28 2006.
Related Stories: More Stories on : Financial Performance | Shipping
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