Monday, August 29, 2011

Mercantile Shipping to better negotiate charter hires

An acute depression can be seen in the worldwide charter markets, as charter rates are directly related to the economic crisis prevailing in the Euro zone, Chairman of Mercantile Shipping Company PLC, N.U. Jayawardena said.

“As such, the Company is under tremendous pressure to reduce the charter hire rates from the originally agreed rates” Jayawardena was quoted saying in the company’s latest annual report.

As a result of this, presently the company earns approximately 75% of the originally agreed charter hire and it has become the main reason for the Rs.23 million loss the shipping firm has made for the year ended March 31, 2011.

To counter this problem, the company is currently negotiating a graduated charter hire agreement with the charterer for a 5-year period.

“This agreement reflects progressively increased charter rates over the period, and the lending bank, the charterer and the Company are parties to the agreement” Jaywardena said.

In addition, he stated that negotiations are in progress to try to secure compensation to the company by securing a share of any profits made by the charterer to offset the reduced charter hires received by the company from those contracted at the inception.

“Considering the present economic downturn, we feel that this is a prudent arrangement” Jaywardena was quoted saying.

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