Baltic Dry Index at 7-mth high

However, quite some way to recovery

The Baltic Dry Index, the global benchmark for freight rates of dry bulk carriers, reached a seven-month high of 2,605 on Monday. The index has gained 47 per cent this month, giving hope of revival for shipping companies, whose stocks have also gained alongside.

The stock of Mercator Lines, India’s second largest shipping company, with the biggest number of dry bulk fleet, gained 51 per cent to Rs 51.65 a share on the Bombay Stock Exchange (BSE) this month. Those of Essar Shipping and Great Eastern Shipping, respectively, gained 53.3 per cent and 20 per cent to Rs 64 and Rs246.2 a share in this period. Sensex, the benchmark index of the exchange, has gained 25.4 per cent to 14,302 in the same period.

“There are some signs of revival for steel consumption from industries such as automobiles and that is reviving the freight rates,” said A R Ramakrishnan, chief executive officer, Essar Shipping. “This is still not a comfortable level, but at least this is giving hope of revival,” he said. Essar Shipping has eight large dry bulk carriers out of its fleet of 26 that includes tankers and mini bulk carriers.

Bulk carriers can handle their operational cost at the 4,000-4,500 index level and running at the current freight rate is tough.

The index, which touched an all-time high of 11,793 on May 20, 2008, started sliding with the global economic slowdown. It touched its 22-year low of 663 in December,as steel producers cut production. Even the world’s largest steel maker, ArcelorMittal, breached contracts for shipping cargo in that period.

The index started seeing a revival since February, reaching 2,298 on March 10 as some Chinese steel producers started stocking iron ore before the end of the financial year. But the revival proved short-lived, as the index again slid to 1,463 by April 7. It index closed at 1,773 at the end of April and since then it has gained 47 per cent, a fresh sign of revival.