India's 2nd Covid wave pushes shipping industry into choppy waters

The devastating second wave of Covid-19 is pushing the shipping industry in choppy waters. Port activities are continuing since these fall under essential services, but few vessels are willing to come to India while freight rates and vessel hiring charges are up. Vessels that are willing are hiking their freight rates by 25-30%, and a chartering service official fear things will get worse unless the government intervenes with confidence building measures.

The chartering service official informed that hiring charges for a coal vessel from Indonesia to India is currently quoting $34,000-35,000 per day against the previous $18,000-19,000/day. Freight rates have risen from $16-17 per tonne a fortnight back to $23-24/tonne. "It is difficult to get a vessel even at these rates," the official added. He cited the instance of a foreign vessel, whose entire 18-member crew has signed a petition to the vessel owner, declining to touch any Indian port.

Wary of Indian ports

A source in Interocean told SteelMint, "As we understand from sources, there are head owners who have lately shown their concern on the present pandemic situation in India and have shown reluctance in trading towards Indian coast. Due to said reason, there are high chances that vessel tonnage requirement shall remain high for Indian coast and the availability of tonnage is going to be lower, which shall impact the freight market."

A few vessels came to Indian ports but their crew members got Covid-infected upon reaching the foreign ports. Consequently, those vessels are now stranded at foreign ports and have to complete 14 days' quarantine or more as per the local regulations of that country. "This situation/ news has spread like wildfire and has given a negative impression to the shipping fraternity about their vessels calling to Indian ports. Vessels are getting diverted from Indian ports to other south Asian countries. Needless to say, this means that future months could become increasingly harsh for the whole global sector, which will be forced to operate in a limited way. This is not going to be the sole result of the coronavirus pandemic but rather a ripple effect of its spread. The short-term outlook for trade is grim. Predicting the pandemic's longer-term impact as well as the timing and scale of the industry's recovery is fraught with uncertainty," the Interocean source added.

Zhoushan Port authorities in China have announced that they will not process and approve yard docking/entry applications of vessels that had called on India, Argentina, Pakistan, Bangladesh, Iran, Philippines, Turkey and Brazil or had Indian crew joining after 28 Mar'21. The authorities will review the above rules only after 28 May'21.

South African vessels are equally wary of Indian ports. RBCT recently issued a notice that there is no quarantine period for vessels but, "All vessel where the last 10 port of call is any port in India is required to have all crew and officers tested for Covid-19 before docking in any South African Port."

West coast more impacted

India's west coast ports are worse off, said a chartering company official, since vessels returning from Bangladesh are at least picking up iron ore from the east coast ports for their onward voyage to China and other destinations. However, no coal vessel from Indonesia is willing to come to India's east coast which may impact ports like Tuticorin, Ennore, Kakinada and Vizag, a source informed. "That impact will probably be felt in the next 15-20 days. At present, it is tough getting a vessel even on the east coast for $20-21/tonne freight against the previous $12-13/t. Steam and coking coal imports are likely to be hit on either coasts which will have a spin-off impact on India's power and steel units," a source said.

Raajesh Bhojwani, CEO & MD, RBB Ship Chartering, told SteelMint: "Ships are showing resistance to come to India and this will create demand supply issue for the Exim trade with India. Freights have already shot up by over 100% in the last three months with over 50% in the last 10 days alone."

He added: "Prices of commodities have gone up over more 100% in the last 12 months and correspondingly freight has too gone up by a drastic 250%."

"There is imbalance due to shortage of containers from the east to west coast and that's where shippers and charters are moving to dry bulk on certain commodities," added Bhojwani.

Coal demand to be hit

Interocean sources said that in coming months, coal import demand is likely to be subdued in view of the surge in Covid-19 infections, high coal stock in the system and high prices prevailing in the international market, Of the total imports in March 2021, non-coking coal was at 12.12 million tonnes (mn t) against 13.16 mn t in March 2020. Coking coal imports were at 5.47 mn t during March 2021, up against 4 mn t in March 2020. "The problem for coal exporting nations such as Indonesia and Australia is that the market is increasingly policy-driven, rather than one that relies on supply and demand fundamentals..," said the source.

In Apr'21, power, and cement sectors registered a m-o-m increase in imports of 3% and 79% respectively, while coal imports for steel and manufacturing sectors fell drastically by 13% and 32% respectively.

Will steel exports be impacted?

India's steel exports in financial year 2020-21 (FY'21) rose a whopping 61% to 18.92 mn t against 11.79 mn t in FY20, as per SteelMint data and had remained quite buoyant in February and March. Mills are again looking toward exports against the backdrop of a drop in domestic demand.

If vessels are wary of touching Indian shores, will steel exports get derailed?

A source said steel prices are being guided by rising global prices and exports will not be hit because of the huge commodity demand globally, especially from China.

However, the Interocean source said: "Lower demand in the Indian domestic market, availability of large volumes of finished products and competitive prices in international market were the driving forces behind exports of Indian steel products. The outlook of the global market being robust on steel demand, basis high infrastructure development in both developing and developed countries, the exports story seems to continue at a moderate pace during the present financial year. However same is subject to trade coming to normalcy and reduced impact of the ongoing pandemic."

By Madhumita Mookerji