Mounting pressure
According to Fitch, relatively low global trading levels, coupled with fleet additions (across segments) are piling the pressure of domestic shippers. Fitch states that all these factors, in combination or in singularity, will lend a significant drag on the revival of charter rates in 2012.
According to Parashunath M, manager at JN Shippers, a small-sized shipping agency in Chennai, “With the global freight market highly unpredictable now, Indian shipping lines have nothing to look forward to for the time being. There will be no immediate respite, as this condition has persisted almost throughout the last year and might continue well into the current year.”
In fact, Fitch stressed that companies with high leverage would find it extremely difficult to make it smoothly through the year.
Operating costs of most shipping firms had increased in 2011 due to increasing bunker fuel costs, which accounts for nearly 40% of operating costs. This was chiefly due to high crude oil prices. The high fuel cost and low charter rates led to industry margins bursting at the seams.
Voicing the grim sentiments of the shipping fraternity in India, Amit Singh, executive at Go Carriers, a small-sized shipping firm in Faridabad, said, “With the dramatic imbalance existing in the bunker fuel cost and charter rates, Indian shippers catering to such segments will not see their fortunes rising, as bunker fuel cost is expected to remain stable through 2012.”
However, not all is lost for Indian shippers. Fitch’s findings revealed that companies catering to niche segments like off-shoring will not be affected much, as this area has not witnessed much reduction in charter rates.
Priyanka Roy Chowdhury |
The tiding in the Indian shipping sector is going to remain unruly, according to Fitch Ratings. The rating agency forecast a negative outlook for India’s shipping sector, with minimal chances of revival spurred by the imbalance in demand-supply dynamics prevalent in the global freight market, which would lead to fleet owners cutting back on the margins. 
