Rebound in charter rates lifts Jinhui

A resurgence of spot charter rates for bulk vessels has executives at Jinhui Holdings hopeful of a stronger second half as more of its fleet is freed from present contracts to transport raw materials such as iron ore and coal.

The listed small-cap saw first-half net profit at its subsidiary, Jinhui Shipping and Transportation, reach US$73.42 million on a comparative 8 per cent advance in sales to US$117.87 million. It earned two-thirds of its interim profit in the first quarter before charter rates fell dramatically.

The Baltic Dry Index, an average of spot charter rates across all sizes of bulk vessels and an assortment of commodities, fell 64 per cent from a high of 4,835 basis points on April 15 to a low of 1,747 on August 3 before recovering in the past two weeks. It posted a similar third-quarter correction last year.

'Our vessel chartering strategy is proving right in that we have anticipated the seasonality and volatility of the freight rates,' said vice-president Raymond Ching. 'We secured contracts for much of our tonnage up to the third and fourth quarters, and we will now see those vessels come back to us to be fixed for strong income.'

The Baltic index rebounded 50.7 per cent from August 3 to close at 2,634 yesterday.

'We don't expect the Baltic to reach the peak of the first quarter, but we expect it to consolidate at a much healthier level than we saw in the second quarter,' said Mr Ching.

Unlike the container shipping sector, firms that transport raw commodities are not staring down the barrel at a huge influx of capacity in the next few years.

Asia's shipyards, which are virtually fully booked until early 2009, have been reluctant to take orders for bulk vessels, which are less profitable than their container and tanker counterparts.

Jinhui, whose fleet is half chartered, lost US$67 million gambling on freight derivatives last year. If those losses and its first quarter, one-off gain of US$20 million for agreeing to end a long-term vessel lease are stripped out, interim earnings grew about 20 per cent year on year.