Shipping firms steam ahead on freight rate hike hopes

Average gains for top five scrips was 12.5% last week

The shipping industry seems to be sailing full steam ahead as stock prices of most of the listed shipping firms are going up due to an expected increase in freight rates.

The average stock appreciation of the top five gainers was 12.5 per cent in the last one week.

Sector analysts are expecting freight rates, in the dry segment, to go up in the near future, benefiting shipping companies in a big way. The rise in global crude oil prices is also expected to trigger higher freight.

The Baltic Freight index had gone up 13.62 per cent to 2320 in the dry segment in the past one month.

V K Sharma, director and head of research at Anagram Stock Broking, said, "The freight rates are expected to go up atleast for the next few months. But these scrips will sustain their growth in the long run, only if the commodity stocks gather strength. The global crude oil prices would also be a decisive factor on the future of these companies." Indian ships are also expected to capitalise on the global freight scenario, owing to the Atlantic Hurricanes.

Some of the domestic companies have already registered very high appreciation in their stock prices in the mid-June to mid-July period.

The share price of Garware Shipping Corporation went up 18 per cent, Bharati Shipyard (17.22 per cent) and Chowgule Steam (15.43 per cent). Shipping majors such as GE Shipping went up by 5.21 per cent to Rs 155.35, Shipping Corporation of India, up 1.80 per cent to Rs 146.44 and Shreyas Shipping, up 1.68 per cent to Rs 93.45 have been modest gainers.

However, the stock price of Essar Shipping, which recorded a 50.77 per cent growth in total income during the previous financial year to Rs 1,112.54 crore was down 0.9 per cent to Rs 31.35. The stock prices of Varun Shipping and Mercator Lines also showed marginal depreciation at Rs 40.54 and Rs 84, respectively.

An Essar Shipping official, said, "This is an unexpected scenario. Normally the freight rates dip in the summer season and goes up during the winter season due to additional expenditure of heating oil. The speculations of market analysts have come to be more of a surprise to us."

Some analysts opined that some of the players down under are expected to out-perform the others in the immediate future.

According to technical analyst, Vijay Bhambwani, "GE looks all set for a big spurt but there would be selling pressure as it reaches Rs 170-175. SCI is also expected to run high. But Varun Shipping looks the strongest of the whole lot. It might spurt to a lifetime high once it reaches Rs 44."

"The International Freight indices are the single largest factor that decide upon the fundamentals. This up-trend is sure to stay atleast for the next three months," he said.