In a noticeable rebound in the global shipping industry and its repercussion on India, the benchmark Baltic Dry Index, which measures prevailing freight rates has jumped 23% so far this month. After hitting a one year low of 1,253 on August 2, the index closed at 1,541 on Friday.

The steep fall in the index came following China’s slow progress in procuring the major steelmaking raw material, iron ore, from the leading supplying countries, including Australia and Brazil. Consequently, the freight rate of iron from these two origins slumped to the multi year record low level of USD 8 a tonne. The scenario has slightly recovered, said an analyst with a leading brokerage firm.

With the re entry of Chinese traders for procuring raw materials, the freight rate for iron ore has rapidly recovered and gone up to USD 12 to USD 13 a tonne since the beginning of this month, depending upon the size of ship. China has started silently building inventory of raw material for use in post monsoon manufacturing of finished goods.

According to Mr Vinay Kshirsagar CFO of Shreyas Shipping, India was not affected by the slowdown in cargo ship demand globally due to China’s slow pick up of iron ore. The Indian shipping industry recorded an increase of over 20% in business in the last financial year and in the first quarter of the current one, which is expected to continue.

With almost 90% of India’s trade by volume (70% in terms of value) conducted by sea and with the largest merchant shipping fleet in the developing world, India’s maritime sector is set to grow to a size of USD 80 billion by 2020. The expected volume handled in 2020 would be approximately 1.7 billion tonnes.

(Sourced from BS)