Small Indian and Chinese shipping companies are lapping up old dry bulk carriers of Great Eastern Shipping, the country’s largest private sector shipping company, in anticipation of higher scrap prices a year later.
Great Eastern Shipping has managed to sell three old ships — a 31-year-old vessel and two 24-year-old carriers — to small shippers and traders from India and China in about three weeks. “We do not deal with ship breakers. Buyers of these ships want to use it for a year or two,” said a spokesperson at Great Eastern Shipping.
The ongoing financial crisis and the resultant drop in economic growth has adversely affected global trade, leading to a decline in demand for ships. Baltic Dry Index, the global benchmark for dry bulk carriers, fell by 94 per cent in November from its all-time high of 11,409 six months ago. This has led many shipping companies globally to lay up ships and sell the old ones to ship-breakers.
However, Great Eastern managed to sell ships at rates higher than scrap prices to small traders and shipping companies. “Freight rate is at a ridiculously low level today. Once that stabilises, scrap rates will also go up,” said Hanoz Mistry, head of chartering, Five Stars Shipping Company. The Mumbai-based company had bought one of the old ships of GE Shipping.
Scrap prices are currently at $270 Ldt (Light Displacement Tonne). The company expects the scrap prices to $350-400 LDT in a year when the ship will be due for dry docking. Dry docking is the repair and maintenance work that is required after a certain period of use and it costs $1-2 million. Besides, the company claims to have the cargo for the next one year, for which it would use the ship.
The other two ships have been sold to the Chinese traders who could not be contacted. GE Shipping plans to sell two more of its old ships and is looking for the right buyers. The company has sold each of these ships at less than $10 million.
