>SHIPPING SECTOR (ICICI DIRECT)

• The Baltic Dry index was down 15.3% MoM, mainly on account of an increase in China’s iron ore inventory

• More than 50% (MoM) drop in day rates in the tanker segment across all vessels categories

• Increase in supply of VLCCs tonnage is putting extreme pressure on VLCC spot market

• The prolonged ore negotiations pulled the market down as rates declined despite an increase in chartering volumes

• The crude tankers fleet is expected to grow by 19.4 million DWT this year. This is more than double the 3.1% growth seen in 2008

• Hundreds of vessels have been laid up worldwide as container lines try to boost rates depressed by US and European consumer paring spending on Asia-made goods

OUTLOOK

Tankers
April was the weakest month YTD for the tanker segment as day rates across all vessel categories declined by more than 50% (MoM). This was mainly on account of a fall in tonnage demand. Despite rising slippage rates and order book cancellations, large quantities of tonnage addition over the next two years are pressurising the freight rates downwards. The tankers market is expected to remain soft due to the subdued economic environment and oversupply of tonnage.

Dry bulk
The Baltic Dry Index declined by 15% MoM. This fall was mainly on account of a rise in iron ore inventory levels in China. The Chinese iron ore inventory increased from 67.44 million tonnes (MT) in March to 69.14 MT in April. We expect the market to remain rangebound as BHP, Rio Tinto and Vale are expected to delay negotiations for as long as possible in the hope that steel demand would pick up. On the other hand, cancellation and delays in deliveries coupled with rise in China’s steel production would have a positive impact on the day rates in the dry bulk segment.

LPG
Day rates in the LPG segment across all vessel categories saw a meagre decline of 1-2% in April. Though we expect low day rates for the next few months on account of weak market conditions and increasing tonnage supply the rates will stabilise in the long-term on account of increase in scrapping activities.

To see full report: CEMENT SECTOR