Essar Shipping defers bulk carrier buy on poor market

Essar Shipping defers bulk carrier buy on poor market

Mumbai: “Essar Shipping Ports & Logistics Ltd has deferred acquisition of three bulk carriers due to a slump in charter hire rates but was on track to deliver projects announced earlier," a top official said on Friday.

Tighter trade finance and the global economic slowdown curbed demand for raw material, stranding cargoes and sending shipping rates plunging to a six-year low.

“We have deferred this in view of the current fluctuation in freight rates," Managing Director Sanjay Mehta said on an earnings call adding: “We’ll decide later what we can do with the money."

“The firm, which has a capex of $2.5 billion over the next three years, had planned to buy 5 dry bulk carriers in 2008-09, of which it has already taken delivery of 2 vessels in August," Mehta said.

The Baltic Dry Index, a gauge of shipping costs for commodities, has fallen more than 90% to below 900 points from its peak of 11,793 hit in May.

Globally, some shippers have declared backruptcy, while others are looking at mothballing ships and cutting jobs if a slowdown in global trade gets worse.

Mehta said that Essar Shipping was insulated against a global turmoil in financial markets as 80% of its total fleet was on firm contracts.

“We might see, in the next two quarters, some slip in throughput but margins will not be affected. We are on track to achieving an earnings before interest, depreciation, taxes and amortisation of Rs800-900 crores this year," he added.

Essar Shipping said that it turned to profit for July-Sept on income from ports and terminal business and new vessels.

It posted a profit of Rs657.2 million compared with a loss of Rs324.2 million. Total operating income rose 44% to Rs6.97 billion.

The profit does not include a marked-to-market loss of Rs2 billion on account of foreign exchange fluctuation.

The partially convertible Indian rupee has shed 8.4% in the quarter.

Shares in the firm have lost a third of their value in the quarter, compared with the CNX Midcap index’s 6.65% drop.

It ended up 4.85% at Rs33.50 in a strong Mumbai market.