Shipping Corporation of India (SCI), the largest domestic sea carrier, has turned around its loss-making liner business by exporting iron ore in containers, which were supposed to carry packaged cargo such as apparel, machinery and fruits.
Iron ore and other minerals are usually exported by bulk carriers. Bulk carriers, which have been a cheaper mode of transport, have been in short supply in the past two to three years, leading to higher freight rates.
The Baltic Dry Index, the benchmark of freight rates for bulk carriers, touched an all-time high of 11,793 in the first quarter of this year compared to 6688 in the corresponding period of the previous year. The container freight rates have been more firm in comparison to the dry bulk freight rates.
“We are repositioning the ships to China with exporting iron ore in containers,” said J N Das, director, liner and passenger services business, SCI. The company has deployed two of its five container ships to China.
Cargo traffic to China is mostly inbound and hence companies lose money on repositioning of the ships. But now the company charges $610 for shipping a 20-foot container to China’s Jing Zang port, fetching it additional earnings.
SCI’s liner business made a net loss of Rs 4.8 crore in the June quarter as against the loss of Rs 46.28 crore in the corresponding period of the previous year. However, this year the company had an addtional service tax on foreign charter vessel of 12.4 per cent amounting to about Rs 2.5 crore.
Besides, it had to incur foreign exchange losses of about Rs 9.5 crore on overseas loans as the rupee depreciated. Barring these two additional items in the quarter, the compnay would have netted a bottomline of above Rs 7 crore.
The liner business contributed about 20 per cent of the Rs 1066 crore in the June quarter. The company exports iron ore mainly from Vishakhapatnam. “It’s a new strategy,” said Vikram Suryavanshi, analyst with Karvy Stock Broking, Mumbai-based brokerage. “The addition of the new commodity will help increase the penetration of container business.”
The company is now planning to get into the logistics business of container freight stations to increase profits. It is also planning to start services to the US.
