Essar Shipping Ltd (ESL), one of India’s leading shipping companies, has added a Panamax vessel of 74,005 deadweight tonnage (dwt) to its fleet of 14 vessels, taking the total tonnage volume to 1.6 million dwt.

Panamax stands for the mid-sized cargo ships capable of passing through the narrow Panama Canal.

Essar Shipping’s fleet now consists of six mini-cape bulk carriers, one standard Capesize (the largest among dry cargo ships), two Supramax and two Handysize (mini-vessels) dry bulk carriers as well as two oil tankers of VLCC category (very large crude carriers).

The second-hand 16-year-old Panamax vessel added to the fleet will replace MV Chandi Prasad, a Capesize carrier of 152,065 dwt decommissioned last month after sailing for 28 years.

Japanese-made ship rechristened as MV Mahavir was acquired for around $5 million. The ship will be deployed for transporting pellets, coal and limestone from Essar Steel’s pellet plant in Paradip to the steel plant in Hazira. “We wanted to utilise this ship for our own cargo, as steel production is coming up, we have a lot of movement,” Ranjit Singh, Executive Director & CEO, Essar Shipping, told BusinessLine .

Essar Steel has emerged as the main customer for Essar Shipping since the inception of Essar’s Hazira Steel Complex in the early 1990s. Hence, Essar Shipping’s fleet is being used for coastal cargo movement catering to Essar’s steel business requirement and providing it quicker access both to raw materials sourced from mines in Eastern India and to steel consuming markets in India and abroad.

Production picks up Essar Steel’s production has picked up lately: for the year ended March 31, 2017 its flat steel production registered 47 per cent growth, while pellet production grew by 60 per cent. This gives Essar Shipping’s CEO hope for more additions to its fleet. “We are still on look out for more Panamax carriers. I am aiming to add more vessels this year, but I am waiting for the right opportunity, as this vessel we have picked up at the right time - since I made the deal till the time of acquisition the price has already shot up by 5 per cent,” Ranjit Singh said.

According to Singh, although catering mainly to the steel business, Essar Shipping is flexible. “We keep mix match of inside business as well as outside business, the moment we get a good opportunity and the market looks up, we get our vessels out, but we make sure that steel never suffers,” Singh explains.

Last financial year, Essar Shipping moved around 11 million tonnes of cargo growing the capacity utilisation to 94 per cent from 80 per cent in the previous year. The company reported 22 per cent growth in cargo handling.

Despite recent “nervousness” in the freight market with Baltic Dry Index (BDI), a key indicator of freight rates, sinking to 954 points as on May 23, due to slow demand from China coupled with oversupply of vessels in the global dry bulk industry, the BDI is still in the comfortable zone and is not expected to drop significantly, experts say.

"The dry bulk market has seen demand picking up with the global economy in a much better state since the second-half of last year. Most of the dry bulk commodities including products such as iron ore, coal, steel, alumina etc, have seen prices going up by 40-50 per cent since June last year", Pradeep Rajan, senior Managing Editor, Asia Pacific Shipping & Freight, S&P Global Platts, told BusinessLine .

"Currently, the freight levels have dropped after they had jumped up during the first quarter of the year. But market watchers think the dry bulk vessels will have a steady run with Chinese economy expected to perform better this year," Rajan said.

The freight rates have overall increased over a year since February, 2016, when BDI has fallen to all-time law of 290 points. The revival in the trade helped India’s shipping majors to take advantage of the prevailing low asset prices and expand or update their fleet. This trend will probably continue as Indian shipping industry still remains under-supplied, experts say.

Related Topics
comment COMMENT NOW