The broader equity market index (NIFTY) reported significant decline of 3.6% and closed at 5,086 after reporting a low for the month at 4,806. The selloff in equity market impacted shipping stocks leading to their under-performance compared to the overall market (NIFTY) in May. The stock price of Mercator Lines (MLL) reported the highest decline of 21% from Rs 59 to Rs 47 and underperformed other shipping stocks as well as the NIFTY index. The stock prices of MLL recovered from the low of Rs 44.4 on May 25, 2010 and closed at Rs 47 at end of the month. Great Eastern Shipping (GE Shipping) reported a negative return of 9.5% and closed at Rs 299. Share of Shipping Corporation of India (SCI) outperformed the market and other shipping stocks with a decline of 2.8% to Rs 160. Varun Shipping’s price declined by 12.1% from Rs 50.8 to Rs 44.6. The recovery in freight rates in tanker and drybulk failed to support the shipping stocks during the month. The Baltic Dry Bulk Index increased by 21.6% from 3,354 at the start of the month to 4,078 after reaching a high of 4,209 on May 26, 2010. The rally in BDI was led by pre-monsoon seasonal demand from India and China and concern on European economy which impacted the sentiment for shipping stocks.
The tanker markets were mixed in May, with VLCC rates decreasing, while that of Suezmax and Aframax increased. Higher imports of products by major consumers supported the increase in rates, while tonnage availability affected the VLCC sector. The freight rates in VLCC declined from average of $37,300 per day in April 2010 to $22,090 in May, while Aframax rates improved from $8863 per day in April 2010 to $19,500 in May. Clean spot freight rates increased by 3.9% over previous month mainly due to higher refinery activities. The shipping stocks showed significant increase in volatility during the month due to sell off in global and domestic equity markets owing to concerns on European economies. The stocks moved in a range of 11% to 32% from their respective lows during May.
The corporate announcements mainly related to quarterly financial performance also impacted the stocks. MLL recommended a dividend @ 20% i.e. Re 0.20/- per share on shares of Re 1/- each for the fiscal ended on March 31, while SCI recommended a dividend of Rs 5 per share. Varun Shipping and GE Shipping recommended dividend of Rs 0.80 per share and Rs 8 per share. SCI delivered its one product carrier to its buyer during the month, while Great Eastern delivered its 1985 built single hull 27,400 dwt general purpose product carrier to the buyers and sold one OSV from its subsidiary Greatship (India). The company also informed the stock exchange that its subsidiary Greatship (India) is proposing, subject to conditions, to make an IPO of its equity shares and has filed a draft red herring prospectus with the Securities and Exchange Board for India on May 12. Our Shipping Analyst |
