Domestic coastal shipping sees more competition, rise in tonnage

With domestic coastal cargo volumes moving up mainly in the container segment, the country’s coastal shipping sector is witnessing a growth in competition.

“In domestic coastal shipping, we had a market share of 70 per cent — both west and east coast put together. Today, that share has come down to 55 per cent as competition is holding 45 per cent of coastal container cargo volume. Also, the market size has grown over the last few years,” Capt V K Singh, managing director of Shreyas Shipping & Logistics, told Business Standard.

Mumbai-based Shreyas Shipping is the pioneer in domestic coastal container shipping and started its operations on the west coast of the country with just four vessels. Since FY15, in a bid to grow its presence, along the entire 7,500 km of coastal line, the company started operating on the less-consuming region of east coast and currently owns a total fleet of 13 vessels.

“Today, we are competing with Shipping Corporation of India, TCI Express and even Concor. We were expecting the competition to grow. Earlier, players would have a one-off trial run, now there are dedicated vessels and players in this segment,” said Singh.

For the last couple of years, coastal container cargo volume has been growing consistently to 25 per cent Compounded Annual Growth Rate (CAGR). However, domestic coastal shipping has been and continues to grapple for a return cargo on the west coast. On the east, however, companies have managed to pave out a way for themselves.

“The east coast business is planned in such a way that we have a return cargo there for EXIM to Jebel Ali. So, overall the development has gone up on the east coast for Shreyas Shipping. For the west, Colombo doesn’t let one do much. We may not be profitable on the east but have 60-70 per cent return cargo on this coast. On the west coast, there is only 20 per cent return cargo. Due to this, our focus has moved to the east coast, as there is more transshipment scope on the east,” said Singh of Shreyas Shipping.

Going ahead, however, the volume growth for coastal container cargo is not expected to be so high, industry officials said. Industry officials see coastal container cargo growth between 15 and 20 per cent over the next five years.

“For coastal cargo growth, more industries need to come up near the coast and also the first and last mile connectivity cannot be too far. Currently, there is no industrial belt in the coastal zone and so, there is limited scope for coastal cargo shipping to pick up,” explained Hitesh Avchat, group head corporate ratings at Care Ratings.

Meanwhile, among the other segment of coastal shipping, the Ro-Ro service, along the coast never managed to take off, while bulk and break bulk is seeing spot movement and nothing on long-term contract basis.

“Nothing is happening in Ro-Ro service. The bottlenecks continue to be as they were,” said Kiran Kamath, managing director at Link Shipping.

In bulk and break-bulk coastal shipping category, spot or short three-month contracts have been carried out by companies such as Tata Steel, JSW Steel and Rashtriya Ispat Nigam Ltd.

Though the business climate in various segments of domestic coastal shipping has been varying, data shows that from 2014-2017, coastal cargo showed 5.58 per cent CAGR growth, while overseas was at 5.21 per cent CAGR with total cargo CAGR at 5.12 per cent. 

The growth in coastal cargo tonnage is higher than overseas cargo tonnage, clearly indicating a pick-up in business along the coast line.