The ocean freight rates have risen three-fold in the last six months. The cost of freight from China is up 200 percent. G Shivakumar, Executive Director and CFO of GE Shipping shared his outlook on the situation.

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“The headlines are being hit more by the container sector but to a slightly lesser extent we have seen dry bulk freight rates move up very significantly in the last few months as well,” he said.

30 percent of GE Shipping’s ships are dry bulk ships and they have been seeing rates higher than seen any time in the last 10 years.

Demand for the carriage of dry bulk cargo has gone up by 6 percent year-on-year (YoY), the fleet has gone up by 3 percent in the same period leading to tightening in the markets.

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“We also have inefficiencies in the supply chain, which are caused by the COVID-19 protocols, which are in place at various ports. There is a lot of confusion and each of the ports – especially in the importing countries in the far east – tend to change and have stricter protocols on COVID-19, which is making everything less efficient than it used to be,” he said.

“Some ports in China have restricted the number of people who can come onboard the ship and to discharge a bulk carrier, you need quite a few people to come onboard. It means that you are going to take two-three days extra to discharge the ship. In one voyage which is 50-100 days, that is to do 4 percent which is gone in capacity, which means that the market is going to get tighter. That is what has made the dry bulk freight rates shoot past their 10-year highs,” he noted.

Out of 14 ships, two ships are on fixed-rate contracts. The remaining 12 ships are exposed to the spot market. So, they keep getting repriced every so often. “12 ships exposed to the spot market and enjoying the current spot market,” he said.

In terms of current spot freight rates, he shared, “These are about 9-12 months contracts. So, it would probably be somewhere around 80-100 percent higher than those rates. The spot rates are more than twice sometimes thrice as much as the rates those ships are fixed.”

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On oil demand, he said, “Five of our ships are LPG ships. They are all on time charter. That market is doing quite well and the rates are fixed at pretty profitable levels. Remaining 27 vessels, which are tankers, crude and product tankers, the rates have been terrible for the last 12 months or so. Basically, oil demand has not yet recovered even to its level of 2019.”

For the full interview, watch the accompanying video.