Rising freight rates show shipping industry recovery:

In a noticeable rebound in the global shipping industry and its repercussion on India, the benchmark Baltic Dry Index, which measures prevailing freight rates has jumped 23 per cent so far this month. After hitting a 1-year low of 1,253 on August 2, the index closed at 1,541 on Friday.

The steep fall in the index came following China’s slow progress in procuring the major steelmaking raw material, iron ore, from the leading supplying countries, including Australia and Brazil. Consequently, the freight rate of iron from these two origins slumped to the multi year record low level of $8 a tonne. The scenario has slightly recovered, said an analyst with a leading brokerage firm.

With the re-entry of Chinese traders for procuring raw materials, the freight rate for iron ore has rapidly recovered and gone up to $12-13 a tonne since the beginning of this month, depending upon the size of ship. China has started silently building inventory of raw material for use in post-monsoon manufacturing of finished goods.

According to Shreyas Shipping Chief Financial Officer Vinay Kshirsagar, India was not affected by the slowdown in cargo ship demand globally due to China’s slow pick-up of iron ore. The Indian shipping industry recorded an increase of over 20% in business in the last financial year and in the 1^st quarter of the current one, which is expected to continue, he added.

With almost 90% of India’s trade by volume (70% in terms of value) conducted by sea and with the largest merchant shipping fleet in the developing world, India’s maritime sector is set to grow to a size of $80 billion by 2020. The expected volume handled in 2020 would be approximately 1.7 billion tonnes.

Aiming to capture the large part of growth opportunity in the Indian maritime sector, Informa Exhibitions India, a part of UK-based Informa Plc, is organising INMEX India 2011, South Asia’s largest maritime event at the Bombay Exhibition Centre, Mumbai, between September 29 and October 1.

Around 500 companies from 42 countries, including Holland, Norway, Denmark, Germany, Korea, Singapore and China are expected to take part in the event.

The products and solutions showcased at the event are broadly classified for dredging, marine equipment, marine offshore technology, ocean engineering, port equipment, port technology, ship repair, shipbuilding and underwater robotics, to name a few.

The Indian shipping industry will continue to remain immune to the global economic slowdown due to exporters’ dependence on low-size ships. As exporters focus on prompt delivery of goods to importers, shipowners are booked at least for the next one year to meet the global demand for manufactured goods.

While demand drivers like trade growth and geographical balance of trade (which determines the length of haul required) are very positive, the supply drivers like new ship building orders, scrapping of existing tonnage, etc, also indicate a good future for the Indian shipping and logistics sector. This is further given a boost by the privatisation of ports and the strong thrust on infrastructure, said Nicky Mason, managing director, Informa India.

Source: Business Standard. By Dilip Kumar Jha. 29 August 2011

http://www.business-standard.com/india/news/rising-freight-rates-show-shipping-industry-recovery/447363/