Essar Cyprus arm sells 6 ships to ArcelorMittal for $80m

The ships are owned by

Cyprus, an arm of Essar Global Fund, and are not part of Essar Shipping, the publicly traded company promoted by the Ruia family in India.

However, industry watchers believe the overseas deal between Essar and ArcelorMittal could be a precursor to a second deal that could involve the sale of some of Essar Shipping’s Indian ships to the steel major.

“Sale and purchase of ships is usual in the shipping industry and picks up momentum when there is upward trend in the Baltic dry index. It is a prudent decision to sell ships when the markets are good”, an Essar official said when contacted.

The official explained that six mini cape vessels were all servicing the needs of the Essar Steel plant at Hazira, which was purchased by ArcelorMittal under the insolvency and bankruptcy code rules.

Mini-capes are ships that can carry upto 120,000 dead weight tonnage and are usually referred to as a sub category of capes.

ArcelorMittal had not responded to ET’s queries until press time.

The Baltic Dry Index or BDI is a benchmark of the cost of hiring a ship for a period of one day. It is measured in US dollars and the rates change daily. The London-based Baltic Exchange issues the prices.

The BDI hit a 10 year-high of 3148 points on 30 June 2021, indicating that the costs of transporting freight via ships has spiralled in the wake of the pandemic.

As costs for hiring ships increase the value of the ships also correspondingly increases.

ArcelorMittal purchased the ships through a tender process in which other international shipping companies are also said to have participated. The mini capes are used for carrying dry cargo such as coal, iron pellets and steel.

ArcelorMittal sold a 50% stake in its shipping arm to Greece-based Ceres Shipping two years ago. However, it continues to remain in the shipping business.

Essar has been selling assets to deleverage the group’s balance sheet. It has undertaken a deleveraging exercise that has resulted in group debt reducing by Rs. 140,000 crores over the past few years.