The Hindu Business Line : 2008, a year of mixed fortunes for shipping companies

Starting off on a cheerful note in the beginning of the year, when the freight market was booming, shipping companies had to take a hard hit in the last four months of the year, when freight rates plummeted sharply.

Dry bulk segment

The charter rates began to drop from August 2008, but took a steep fall in the last four months, especially in the dry bulk segment.

The Baltic Dry Index, an indicator of the dry bulk market, fell to 8,934 in July 2008, a 12.8 per cent fall from the previous month. Thereafter, it fell to an average of 4,975 in September, a 32 per cent fall from the previous month and touched 1,808 in October and 824 in November.

On December 25, it was as low as 774.

The overall fall in BDI from July to December works out to about 90 per cent, industry sources say.

Liners

In the liner sector, the fall ranged between 50 and 70 per cent from the Indian sub-continent to Far East, West Asia and Europe sectors.

The freight rates are also falling on the return legs between 35 and 50 per cent.

In the tanker segment, it was a less steep fall compared with the freight rates in the dry bulk segment.

Tankers

The Baltic Dirty Tanker Index fell from 1,866 as on July 1, 2008 to 1,073 by November end, a drop of 42 per cent.

The Baltic Clean Tanker Index during this period fell by about 40 per cent to touch 880 by November end.

Industry sources said the chemical market, especially commodities such as benzene, toluene and xylene, softened by 10-15 per cent during this period, especially in the east of Suez markets.

In general, freight rates fell across all sectors and geographies.

However, some trades have been more affected, such as iron ore exports from Brazil and India to China. Cape size bulk carriers, handymax bulk carriers and supramax carriers, which mostly operate from Brazil and India, witnessed the steepest reduction.

Far East markets

On the Far East sector — from India to China, Korea, Hong Kong, Singapore and Malaysia, the fall in freight rates was about 50 per cent in the last four months, while from the Far Eastern ports to Indian sub-continent, the fall was about 60 per cent.

Analysts attribute the fall in freight rates mostly to the financial crisis that unfolded in the US and then spread to Europe and other countries.

Also, China found itself with a huge inventory of iron ore and coal, which pulled down demand for sea transportation further.

Trade, industry sources said, was also hampered by lack of confidence between banks, through which the letters of credit are routed.

The prices of major traded commodities such as iron ore, steel and other metals also collapsed due to lack of demand, constricting trade in these commodities.

Analysts say this trend is likely to continue in the coming months, as there will be pressure on demand.

Also, the competition is becoming fierce, which will put pressure on freight rates.