Challenging near-run projection for domestic shipping sector

A recent report by noted credit rating and research agency ICRA projects challenging business environment for the domestic shipping sector. “This is mainly because of capacity additions done anticipating uptick in charter rates which did not fully materialise leading to subdued return indicators and debt coverage indicators. In recent period, the increase in bunker fuel costs has also added to the profitability pressure,” the agency maintained in a release.

“The charter rates are a function of global demand supply trends for the major segments – dry bulk, tankers, containers and the offshore segment. The tanker rates had witnessed a moderation during 2016 and 2017 and reached lows of ~$3,000/day during May 2018 (for VLCC) mainly on account of high order-booking by the shipping companies in the prior years when VLCC rates were above US$50,000 / day in 2015. The industry saw close to 100 VLCCs delivered in 2016 and 2017 whereas the scrapping remained relatively muted, thereby resulting in excess supply in the market,” it further added.

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