Ships prices stays high

Freight rates remain low.

The cost of acquiring new ships in the key tanker segment has not come down significantly for Indian players over the past 15 months despite cooling off in the freight rates during this period.

Senior executives in the shipping industry highlighted that expectations of a strong global growth in petroleum demand in the medium term and the resulting transportation needs have kept asset prices strong.

Besides, the International Maritime Organisation has mandated that single hulled tankers should be phased out by 2010.

Says H K Mittal, chairman and managing director, Mercator Lines, " We are hoping that asset prices in the shipping industry will come down to more reasonable levels. In the interim, we have chartered in three vessels."

Adds a senior official of Essar Shipping, "It is our policy to buy assets that fits our requirements and also look for the right price."

A senior official at GE Shipping pointed out that the company sold six ships in 2005-06 and bought only one. The official added that high asset prices has made it difficult to make aggressive purchase of ships.

In the tanker segment, the cost of acquiring a new VLCC (very large crude carrier) with 300,000 dwt capacity is currently pegged at $ 126 million, virtually unchanged from March 2005, say sources in the shipping industry.

In contrast, current spot freight rates in the VLCC segment are at $33,000 per day level as compared to the average of $ 50,950 per day in Q4 FY05.

Similarly, in the Suezmax segment, the cost of acquiring a new vessel with capacity of 150, 000 dwt is currently pegged at $ 73 - $ 74 million as compared to $ 77 million tonne in March 2005.

Freight rates in the Suezmax segment are currently at $ 34,000 per day as compared to an average of $ 46,890 day in March 2005 quarter.