October 07, 2008

Indian cement firms buying ships for coal transportation

Reuters reported that Indian cement and power firms are buying bulk carriers to combat rising freight costs and long queues for ships, while eyeing a new revenue stream by putting these vessels in the market when idle. A steep rise in freight rates last year prompted some Indian firms, which depend a lot on imported raw material, to buy vessels or expand their fleet, while others entered into long term contracts.

Mr VM Mohan VP corporate finance of India Cements, which imports 800,000-900,000 tonnes of coal annually from Indonesia and has bought two dry bulk vessels earlier this year, told Reuters that “In the dry-bulk segment, freight rates are going through the roof and we also find it difficult at times to find ships. We don’t want to take chances.”

Mr Mohan said that “It has paid as much as USD 45 per tonne to USD 50 per tonne as freight charges, while the vessel operating cost was USD 12 per tonne USD 15 per tonne. Now, we do not need to on the market for ships.”

The Baltic Exchange’s chief sea freight index for global raw material trade, which monitors 40 major export routes, soared nearly 150% between January and November 2007.