DRY BULK OPERATING – CHALLENGES AND OPPORTUNITIES

All of us present here have honed our skills in chartering and trading and have faced umpteen fluctuations in the market. Today, I would like to share my thoughts covering the Indian Market & related trade in context of dry bulk operating in India.I would not talk about the strategic challenges and opportunities but the practical issues which we face in our day to day functioning.

Dry bulk operating is relatively a new model in context of Indian shipping. In past 2 decades, we have seen many operating companies come and gone. On an average, the shelf life of an operator in Indian market is around 7 to 8 years, with an exception of a few market experts who have evolved to be huge success withstanding all volatility and market Risks. The reason behind the longevity of these companies is of course risk calculation and diligent market study. And, such names are doing exemplary job and setting goals for all of us.

So, let me please begin with the challenges we face.

It’s often quoted that there will be more changes, more competition, and plethora of opportunities in Dry Bulk Industry in next few years as compared to the times gone. And many people sitting over here will be doing something different within next two years if they do not rapidly adapt to these changes. If we don’t brace up ourselves for the newer challenges, market tides would be difficult to manage. Of Course, we all know, the main challenge of Dry Bulk Market is its volatility. No operator can secure their position in the market as new day come with new amendments and new norms – Say like , Ballast Water Management, 2020 bunkers etc etc. Adding to it, the unpredictability of the Crude movement along with the geo political conflicts like trade wars, Brexit, Iran sanctions and then JWC revisions – you are practically at the mercy of the market and unable take long term positions. Adding to market volatility, each business works at a huge amount at stake with very limited margins. With a turnover of more than half a million in each fixture, the profits secured are very minimal and does not justify exposure vs reward. Over-dependence on China. With the destination for over half of the world’s iron ore and a quarter of coal, China is the defecto driver and the most dominant force of the dry bulk market. Is it a challenge? I don’t know but what we see is that any sudden policy change in the regime can cause a huge swing in the shipping rates. Another thing which we are observing is, that many shipowners have not maintained vessels sufficiently due to the weak market. Ofcourse this is to minimize their operating expenses which in turn has a negative effect on the condition of the vessels. Bad maintenance results in lower quality on the services offered as well as higher costs in the future due to potential repairs. Another challenge, which my competitor friends would agree, is some of the incognizant and unaware counterparts who make it even more difficult for operator to get things done smoothly and to run business. The lower freight and tough competition has not been supporting and at a certain times, you are forced to agree on some very risky terms in order to stay relevant in the business. Coming to the opportunities.

I am now countering myself with what I just said previously when I say Market volatility is an operators best friend. It is entirely upto us if we are able to covert this volatility as an opportunity and make good profits basis tomorrow’s “uncertainty”. A good operator will always tell you that they make money through volatility due to their ability to go long and short on the turn of a card. Infact if the market doesn’t move then there is no fun and you need to have the ability to get the right insight of the market movement to know when and how to act. One interesting thing which we have observed lately is that due the recent Business Consolidation or the acquisitions happening in India, most of our bigger counterparts are now having their platter full. So, earlier, all the companies which were untouchable to these big multinational Owners due to their financial health etc have now been taken over by relatively financially strong charterers. This has allowed these big Owners to fix their cargoes under a better assured brand, which keeps them busy and full. In turn, this has left us – the local, regional operators to fill the void left to cater to the medium and small segment traders who have no option but to rely on us to move their cargoes. Shipping is a rising Sun in India. For the past 8 to 10 years, there has been a phenomenal growth in trade in whole Indian subcontinent. Constant inward and outward Cargo movement in Indian Subcontinent serves as a big opportunity to traders. Our steel mills, power plants, cement companies – everyone has been ramping their production at a very large scale, which obviously creates a huge opportunity for the operators to pitch in and serve their cargo shipping requirements. The leverage of local presence also adds a cherry to the cake. The cargo is here. The operator is here. The decision making is here. The relationship is here. What else do you need to execute the business. With the expansion of shipping industry prospects for bright future has been opened for people all over the world. Universities have launched various courses to study dry bulk cargo operations, freight studies, trading etc. These courses facilitate students and interested candidates to have an initial exposure into the field and what lies ahead of them if they wish to make it as a career. To summarize, I would like to conclude by saying that Shipping is an intense field providing a lot of exposure and opportunities & it’s just a matter of correct observations, Market know how, trading knowledge, guidance and obviously tons of good fortune that would help everyone grow exponentially in this field. Thank you