High tide for Indian ship builders

Capacity of ship-making firms booked for four years.

Want to buy a new ship? Stand in queue. You can hope to get it after four years, at the earliest.

The capacity of the Indian ship-building industry is fully booked for the next four years, because of a combination of factors like mandatory phasing out of old tankers, cost competitiveness of Asian companies and the collapse of European shipyards.

And what is more, the demand-supply mismatch in the global ship-building industry will become acute in the coming years.

PC Kapur, chairman of Bharti Shipyard, said the demand for new ships across the globe had gone up dramatically in the last few years because of the replacement of old tankers, which was mandated by the International Maritime Organisation.

Companies are now supposed to periodically replace old ships with new ones. For instance, close to 100 ships making up nearly 2 per cent of total tonnage capacity across the globe, were sent packing on April 5, and this has created a huge demand for new ships.

Kapur said most of the ship-building capacity in India was with government-owned companies and these companies were only into defence production.

Private companies with a combined production capacity worth Rs 3,000 crore are expanding their capacity but that is not enough to service to the country's demand.

Bharti Shipyards and ABG are two major private ship-builders in India. There are a couple of mid-sized ship-builders each in Kolkata and Goa. HK Mittal, chairman of Mercator Lines, said the demand for ships was outpacing the expansion of ship-building capacity.

"It will be increasingly difficult to buy a new ship in India. However, that is not a cause for concern for a buyer. The Indian demand will shift more to China," he said.

A source in Great Eastern Shipping said the demand for ship building was shifting to Asian countries, mainly China, Japan, and South Korea because of the collapse of European ship-building yards.

"The Asian yards are more competitive over their European counterparts and therefore rule the show," he said.

According to the global order book position of 2004, South Korea had 37.6 per cent of the outstanding orders, Japan had a 28 per cent share, and China had a 14.2 per cent share of the global market. The combined share of India, Pakistan, Bangladesh stood at 3.9 per cent.

SWELLING ORDER BOOK: THE Cause

Close to 100 ships, making up nearly 2 per cent of the total global tonnage capacity, have gone to ship breakers on April 5

Cost competitiveness of Asian companies and the collapse of European shipyards

PROBLEMS REMAIN

Most of the ship-building capacity in India is with government-owned companies, which are only into defence production