The continuing slump in freight markets, with the Baltic Dry Index touching 20-year lows last month, has prompted the Ruias-led Essar Shipping to pull back its two very large crude carriers (VLCCs) from the spot market to long term contract for better yields.
With this, the company's almost entire fleet of 25 vessels, totalling 1.8 million DWT, is in the long term market, avoiding the more volatile spot market.
“While the VLCC would have fetching between $5,000 and $10,000 a day in the spot market, in the long term, the same asset is bringing in $21,000 a day at today's rates,” the company's Managing Ddirector, Mr A.R. Ramakrishnan, told
While one of the VLCCs is on a one-year charter contract, the other vessel has been booked for another three to four months. The company will be again looking at re-deploying the vessels on long term charter contracts.
ESL's new acquisitions will also be placed on long term charters, ranging from three to five years for third party customers and 10 to 15 years for group company cargoes.
It is inducting six mini capsize vessels into its fleet by mid-2012 from STX Dalian shipyard at a cost of $ 400 million, with the second in this series anchoring at an Australian port last week to pick up a coal consignment.
The company is betting big on this category of vessels, especially in the wake of many ports, including Chinese ports, not inclined to allow the new generation super bulk carriers of 400,000 DWT. About seven to eight of these vessels are being currently built across global shipyard.
Essar Shipping will also be looking at acquiring offshore rigs, especially as its rig, Wild Cat, getting deployed off Indonesia, earning $2,85,000 a day.
Eyeing acquiring assets
“We see emerging opportunities in the Far East region. We will be looking at acquiring new assets for offshore deployment in this region,” Mr Ramakrishnan said.
Its strategy to fix vessels on long term contracts and earnings from Wild Cat-enabled the company to book profits of Rs 48.6 crore in the third quarter of this fiscal, up from Rs 33.9 crore in the year ago period.
On market trends, Mr Ramakrishnan felt that while the outlook for the short term was gloomy, the medium and long term trends were positive. He ascribed the fall in BDI last month to holidays in China as the country celebrated its New Year, disruption in loading at some key ports and the global economic overhang.