Mercator Lines (Singapore), the leading Indian-owned international dry bulk shipping company focused on high growth markets such as India and China, says it has entered into a four-year Contract of Affreightment (COA) with a state-owned Sri Lankan company.

Mercator will transport about 650,000 tonnes of coal annually from Indonesia to Sri Lanka for four years, beginning from last quarter 2010. This contract is expected to generate US$31 million ($42.8 million) in shipping revenues based on a time charter equivalent basis.

Under the contract, Mercator will offer total logistics solution from Indonesia to the customer’s point of usage. The port infrastructure facilities in both Indonesia and Sri Lanka necessitate the use of geared vessels and Mercator can deploy any of its existing fleet of Geared Panamaxs to service the contract.

Mercator would be transporting coal from Indonesia to Sri Lanka and also provide barging up to the jetty. The contract involves surface logistics in Sri Lanka which would be sub-contracted to Mercator Lines Limited (MLL), the Indian parent of the company.

The COA has a bunker adjustment clause which allows Mercator to minimise the company`s exposure to the risk of increment in fuel cost.