Shipping Corporation of India (SCI), Great Eastern Shipping and other lines will remain in troubled waters for at least another year as global trade slumps with consumers in developed markets cutting down on spending due to job losses and a surge in number of ships sailing in global waters, industry officials say.

“Outlook for the next 12-18 months is not very bullish,” G Shivakumar,
chief financial officer at Great Eastern Shipping said. “Earnings from
shipping will remain subdued as global economies have shown narrow
improvement.”

The shipping industry has been hurt by the collapse of global trade
because of credit crisis with freight rates last year plunging as much
as 94% in a matter of 8 months, leaving companies in deep losses and
forcing some to cancel orders for new ships. India’s exports have
fallen for 12 straight months and any recovery in higher prices for
transportation is far away as shipyards are expected to deliver nearly
37% percent of the current capacity in the months ahead pressuring
freight rates.

The Baltic Dry Index (BDI), which was at a peak of 11,793 in May 2008,
fell to as low as 663 by December. But has since recovered to 3,103,
still down 74% from the peak and showing little signs of getting back
to good old with companies trimming investments and individuals
reducing spending. BDI tracks world-wide international shipping prices
of various dry bulk cargoes

Great Eastern’s quarterly profit dipped 82% to Rs 106 crore and SCI
said the September quarter net earnings were down 88% to Rs 34 crore.
“There is every possibility that the whole of 2010 will be bad for the
sector,” SCI chairman & MD S Hajara told ET. “From 2011, things
will start looking up.”

The hopes of recovery also is more based on the belief that loss-making
liners such as Nippon Yusen, Mitsui OSK Lines and others across the
globe may cancel orders and reduce possible supply of ships. “Some
ships will never get delivered due to cancellations and shipowners may
also delay delivery beyond 2012. This will, to some extent, reduce
supply pressure,” said SCI’s Hajara.

Source: The Economic India Times

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