Bangalore: Two of India’s top shipping firms, Shipping Corp. of India Ltd (SCI) and Great Eastern Shipping Co. Ltd, have started returning ships they had hired, with falling demand for goods and bottoming freight rates.
State-owned SCI earlier in January returned a container ship it had hired from a German owner, a company official said on condition of anonymity because he is not authorized to speak to the media.
SCI also negotiated a nearly 50% cut in the rates for another container ship hired from the German owner for the remaining period of the contract till June 2010, the official said.
A spokesman for SCI declined to comment.
Great Eastern also returned a mid-sized dry bulk carrier it had hired on a four-year contract from Japan’s Sanko Steamship Co. Ltd before the end of the hiring period.
“We returned the ship due to bad market conditions,” said a spokeswoman for Great Eastern. The company paid “some settlement” amount to end the contract prematurely, she said.
Besides operating their own ships, fleet owners hire ships from the market to carry cargo.
The shipping industry has been hit by the global financial turmoil because of waning demand for trade, leaving many ships idle for lack of freight. Frozen credit lines have also paralysed the shipping trade since mid-September, drastically cutting shipments and, in turn, the use of dry bulk carriers on traditional routes.
Around 255 container ships with a capacity to load 675,000 standard containers, or 5.5% of the global container shipping fleet, are lying idle, as per AXS-Alphaliner, a container industry vessel supply database.
SCI has already laid up two if its mid-sized bulk carriers due to lack of cargo for operating the ships. Great Eastern has cancelled orders for two new mid-sized dry bulk carriers it had placed with China’s Cosco Shipyard Group Co. Ltd “with a view to reduce risk in the current highly uncertain business environment”.
Last week, Mercator Lines (Singapore) Ltd, the dry bulk shipping subsidiary of India’s Mercator Lines Ltd, said some of its blue-chip customers may be looking to renegotiate lower rates for ships it has rented out on fixed rate, long-term contracts of up to five years. It counts Tata Power Co. Ltd, ArcelorMittal, China Ocean Shipping (Group) Co., Cargill Inc., Bunge Ltd and Glencore International AG among those that have hired its fleet of 11 dry bulk carriers.
The London-based Baltic Dry Index, a measure of costs for shipping dry bulk commodities such as coal, iron ore, steel and grains, had plunged 92% to 663 points in December from a record high of 11,793 points on 20 May. The index recovered to just above 1,000 points as on 28 January.