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The Baltic Freight Index (BFI), the prime indicator of the health of the dry-bulk shipping sector, has spurted by over 300 points over the last four months, breaching the psychologically important barrier of 1000 after one year. The BFI, which closed at 794 points on December 31, 1998, touched 1,112 points on May 12.

The industry expects higher freight rates at least in the short run but is unsure whether the present spurt will be sustained.

Sources in the Indian National Shipowners Association (INSA), the apex body of the shipping industry, said, "The current spurt is definitely good as the 1000-point barrier has been crossed after a long time. It augers well for the industry if the trend continues. It is, however, difficult to say at this point whether this trend will be maintained."

 

A senior official of Shipping Corporation of India (SCI), too, agreed. "The rally is definitely a cause for optimism but not too much importance should be attached to it. Overall demand in the global economy has not really picked up. Currently, only the US economy is doing well."

Arun Mehta, managing director, Varun Shipping Company, said: "This is the beginning of better days and better freight rates."

The current rally has been chiefly driven by the demand for foodgrains in South America.

R S Platou, a reputed firm of Norwegian shipbrokers, have stated in their March, 1999 report: "The main reason behind the finer freight levels for handysize and panamax (classes of ships based on freight and transport capacity) vessels was higher shipment of grains from South America to the United States, while increasing activity in the coal trade was the factor main factor leading to slightly firmer rates in capesize."

M Lokur, a senior executive with India's leading private sector shipping company, Great Eastern Shipping Company (Gesco), concurs: "This particular rally is very much grains-driven as there has been a spurt in demand in south America. This has led to enhanced trade between South America and various destinations in the US, far east and United Kingdom and Europe." However, INSA sources also point out that the BFI is barely 100 points over the base level of 1000, which was arrived at in 1985.

Other shipping industry sources say that the present recession, which was accentuated by the economic crisis in south-east Asia, is far worse than the one which gripped the industry in the eighties. They point out that a 100-point spurt does not give much cause for celebration under the circumstances.