Co reaping gains from one-year time charter on tankers which earn as much as $21,000 a day

Essar Shipping Ltd continues to deploy its fleet in the long-term contract market to insulate itself from volatility in the spot market.

The company’s strategy paid off last quarter when it clocked a 38 per cent increase in revenue. Tanker rates in the very large crude carrier (VLCC) segment fell from an average of $17,368 a day in April 2012 to $16,362 in May, tanking to a low of $7,085 in June. Towards the end of last month, the rates plummeted to just over $1,000.

Similarly, the Baltic Dry Index fell from 1101 in May to 937 in June. Essar Shipping Managing Director A.R. Ramakrishnan told Business Line the freight market had been subdued during the period, although long term rates were significantly better than spot rates.

A tanker on a one-year time charter, for instance, earned between $18,000 and $21,000 a day, while the same asset on the spot market could hardly get $4,000 a day.

Ramakrishnan, however, is hoping the market would not fall any further, especially with coal imports by India set to rise after Coal India decided to import the commodity.

Its semi-submersible, Wild Cat, currently deployed in Indonesia has been fetching a rate of $285,000 a day. “It has almost completed one year of operation there and the contract is being extended by another year. Rates in the offshore drilling segment are relatively high,” he said.

Its two jack-up rigs being constructed at ABG Shipyard are likely to be delivered by next year.

The firm is going ahead with its $1.1-billion expansion programme. Out of the six mini-cape size vessels on order, it has received four and the remaining will join its current fleet of 25 vessels in the next two months. Another six supramax vessels are being built at ABG yard.

amitmitra@thehindu.co.in

(This article was published on August 6, 2012)
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