Situation in dry bulk grim: SCI

S Hajra, CMD, Shipping Corporation of India, said there is a complete loss of trust and faith in the banking industry. He said the situation in dry bulk is grim.
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Dec 11, 2008, 04.21 PM | Source: CNBC-TV18

Situation in dry bulk grim: SCI

S Hajra, CMD, Shipping Corporation of India, said there is a complete loss of trust and faith in the banking industry. He said the situation in dry bulk is grim.

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Situation in dry bulk grim: SCI

S Hajra, CMD, Shipping Corporation of India, said there is a complete loss of trust and faith in the banking industry. He said the situation in dry bulk is grim.

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S Hajra, CMD, Shipping Corporation of India

S Hajra, CMD, Shipping Corporation of India , said there is a complete loss of trust and faith in the banking industry. He said finance suddenly seems to have completely dried up.

 

He said the situation in dry bulk is grim. "We have seen such a drastic reduction when it comes to dry bulk."

 

Here is a verbatim transcript of the exclusive interview with S Hajra on CNBC-TV18. Also watch the accompanying.

 

Q: Give us some perspective of what your current rates are? Some reports say that something that would be about 30,000 tonne in some of your Handymax shipping containers would now be worth about 3,000. Have you seen such a drastic reduction?

 

A: Yes, of course. We have seen such a drastic reduction when it comes to dry bulk. Obviously, I suppose all over the world the dry bulk operators are really bleeding. The Baltic Index, which was at 11,700 in May 2008, came down to below 700. This kind of fall has possibly not been witnessed ever in the history of shipping.

 

So, as far as dry bulk is concerned, the situation is quite grim, because China has almost stopped importing ore from Brazil, and even India has been affected. This is because they have suddenly cut down on steel production, and that had been the main catalyst for the entire dry bulk shipping all over the world. So, with China suddenly slowing down steel production, the dry bulk market has been very badly hit.

 

This affects not only dry bulk but all other industries as well. With the difficulty in the world financial markets, we are seeing a situation where the LC (Letter of credit) of a well-known bank is not even honoured by another bank. There is a complete loss of trust and faith amongst the banking industry. Finance suddenly seems to have completely dried up.

 

Q: The Baltic Dry Index has inched up from 663 to 679. Do you see this as a bottoming out? Separately, there are bankers who say that some semblance of trust is returning to the credit markets. Would you go with both these premises?

 

A: I personally would only say that this 663 or 670 doesnít make any difference. I would also say that with whatever we have seen in the financial market, it is far too early to really predict whether some semblance of order has really resumed or not.

 

But of course, with billions of dollars being pumped in by almost all the important economies in the world, hopefully some semblance will resume, and things will improve.

 

But whether it has already bottomed out or not, unless one presents me with a crystal ball I wonít be able to forecast how long this is going to last. When it will bottom out and when it will improve. But as far as SCI is concerned, or for that matter any dry bulk operator is concerned, the situation in the dry bulk space is still pretty grim.

 

Q: Is there any sector or space where trade is acting as a defensive? About 70% of your fleet is in terms of tankers, and most of them are crude tankers. So has the Dirty Tanker Index or the crude oil side, despite prices having corrected, sort of held up revenues for youíll and shipping companies in general? Are there any defensive trading spaces that are still holding up volumes for shipping companies like yourself?

 

A: Yes, you are very right, and youíve answered your own question. As far as the crude market is concerned, other than the VLCC, which had witnessed some fall and even that has recovered to some extent. As far as Suezmax, Aframax and other segments of crude tankers are concerned, they have held quite firm. Not 70% actually, close to 80% of SCIís fleet consists of tankers. Not all crude but crude products and tankers included, it is about 80% of our fleet. So, fortunately because of that we have not been that badly affected.

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