The Shipping Corporation of India(SCI), that owns nearly one-third of India's tonnage, has decided to 'wait and watch' before it acquired new ships as asset valuations had declined on account of the downturn .
"Last October when we were negotiating with shipyards for four capesize vessels that would be delivered in 2012, for $93 million, it seemed like a good bargain. But, prices started falling thereafter, and now we have decided to monitor the international prices till we strike a deal.", S Hajara, chairman and mangaing dirctor, SCI said at the sidelines of 'Intaglio 2008-09', the annual business school meet of the Indian Institute of Management, Calcutta(IIMC). Capesize vessels are mainly used in dry bulk shipping and have a cargo-carrying capacity of more than 100,000 tonnes of deadweight tonnage(DWT).
SCI has,however, not deferred its acquisition plans otherwise, Hajara clarified. It will take delivery of three ships during 2009.It has already placed orders for 29 ships with a net capacity of 2.2 million DWT for Rs 8,000 crore.This apart, the state-owned shipping major also planned to place orders for 40 new ships for $2 billion as a part of the Eleventh Plan period layout. The delivery would be taken between 2009-2012, and would take up SCI's tonnage to 10 million DWT from 5 million DWT now.
At a time when the international shipping industry has been hit due to a dramatic dip in dry bulk trade, SCI hopes to be comfortable, as nearly 80 per cent of its fleet were crude carriers. "The tanker market is not that badly affected, as crude is the main source of energy for any country.Even during recessionary times there is compulsory usage of petroleum products for transportation and household purposes.", Hajara claimed. He, however, admitted that the Baltic Dry Index(BDI) which measures freight rates for bulk commodities,mostly iron ore, coal, and grains, has seen a drastic and unprecedented fall from its peak at 11,700 points in May 2008 to below 700 points in December last year.
"It is slightly above 800 points now.Dry bulk trade is at its worst possibly.", he added. As countries across the globe forecast lower or negative growth rates for next fiscal, demand for dry bulk shipping is likely to be down next year as well. Tanker rates have also come down, with maximum impact on very large crude carriers (VLCC) rates. The freight rate for VLCC in the spot market has declined to an average $46,426 a day for the quarter ending December 31, about 21 per cent lower than the corresponding period of the previous year. "Freight rates for other categories of crude carriers have been down by 5 to 10 per cent.", Hajara informed.
