Stronger Baltic Index, captive cargo boost Essar Shipping numbers

Firm's FY17 cargo handling biz up 22%, helped mainly by its captive cargo whose share rose to 80%

Essar Shipping Ltd (ESL) logged 22 per cent growth in its cargo handling in FY17 helped mainly by its captive cargo whose share rose to 80 per cent. The company that runs a fleet of 14 vessels, saw its capacity utilisation rising from 80 per cent to 94 per cent in last fiscal.

A spike in the Baltic Dry Index, a key indicator for freight rates, also boosted Essar Shipping's performance. Between February 2016 and March 2017, the Index shot up four times from a low of 290 to 1300.

In FY17, ESL carried dry bulk cargo of almost 11.5 million tonne, as against 9.4 million tonne in the previous financial year. More than 80 per cent of its fleet carries dry bulk cargo, which includes products like iron ore, coal, bauxite and limestone. The company's two very large crude carriers (VLCCs), MT Smiti and MT Ashna, are used for crude oil transportation and are employed on spot contracts to take advantage of volatility in the crude oil prices.

Ranjit Singh, executive director & chief executive officer, said: "Our strategy to have an ideal mix of captive and market cargo has ensured better utilisation of vessels in FY17. The stronger Baltic Dry Index, coupled with increased activity and capacity utilisation at Essar Steel, has also made a positive impact on our toplines. I am happy that we have been able to demonstrate our commitment to promoting the government's initiative by growing our coastal cargo movement significantly. Almost half of our fleet is currently engaged in coastal movement."

A key highlight of 2016-17 was the doubling in coastal cargo movement triggered by the increased capacity utilisation at Essar Steel, which is among ESL's key customers. The company also benefited from a considerable growth in backhaul cargo both on the east and west coasts of India because of the all-round growth in Essar Steel.

ESL operates a diversified fleet of 14 vessels, including VLCCs, Capesizes, Mini-Capesizes, Supramaxes, Handysize bulk carriers, and mini-bulk carriers. A sizeable part of the capacity is deployed using an optimal mix of spot markets, long-term contracts and COAs (contracts of affreightment), maximizing profit and insulating the company from volatility.

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