India’s shipping trade may stagnate temporarily

Jun 20, 2011, 2:43PM EST
After the storm comes the calm

The shipping trade is set to face another hurdle. This comes after the bouancy that was experienced last year until December when the floods in Australia changed the pattern drastically. The spate of cancellation of new buildings the world over and particularly India will get arrested around September and level out around December this year according to people into chartering. 

Following the Australian flooding, shipping rates for transporting dry bulk industrial minerals extended losses in the beginning of January 2011 with the market unable to absorb vessels idled from shut ports, while additional newly built ships were also putting pressure on rates. The Baltic Dry Index was 1453 on 12 January 2011, compared with 1621 on 5 January 2011. Capesize, Panamax, Supramax, and Handysize were at 1637, 1970, 1360, and 758, respectively. Flooding in Queensland, Australia continued to affect the raw material exports from the coal producing region for some months thereafter.

However, the Japanese tragic tsunami and its aftermath had a short-term impact on its sea trade with India. According to shipping industry heads and policymakers export and import of iron ore got affected along with crude oil and sea products in short-term. As far as business was concerned the impact was short lived.  

Hanoz Mistry of Five Stars Shipping Company said, “Last year because the OECD countries were restocking and taking deliveries of new building the market went up in the first part of the year. Then the crisis was so sudden with the flooding in Australia and the earthquake and tsunami in Japan that the market dipped steeply. Panamax rates fell from $ 22,000 to $ 15,000.

“The net trading fleet for cape size vessels worldwide was placed at 1235 in April this year. Panamaxes were placed at 1860, Supramax at 2233 and Handysize vessels at 2932 approximately. Each month around 26 vessels have been coming out of the shipyards and only one fifth of this number was taken out of the trade – for demolition. On the other hand the global international trade grew by only 5 per cent.”

The scenario at the Indian shipyards is that there will hardly be any cancellation since nearly all of them cater more for the offshore sector which is seeing some growth. Pipavav shipyard, the only one building bigger vessels in India, has already had price renegotiations and is expected to start deliveries soon. “It is not possible to accommodate cancellations after the engines have been bought,” said a spokesman from the shipyards Association of India.  

The trade in India remains optimistic,” informed an analyst. “There are more imports into India than exports. With a large number of power projects coming up the demand for thermal coal is spiraling.  For a 1,000 MW generation plant some 3 million tones of thermal coal is required. Several major players are going in for ultra mega power plants including Reliance, Tatas, Mundra, Jindal, etc.”

Five ultra mega power projects (UMPPs) of 4000 MW each are in various stages of development using super critical technology and involving an investment of $ 3.3 bn. These are being set up in Sasan in Madhya Pradesh, Mundra in Gujarat Akaltara, Chattisgarh and in coastal Maharashtra and Karnataka on a build, own and operate (BOO) basis.

Oil imports have exceeded two third the country’s requirements. Iron ore exports mostly from Goa and Karnataka are likely to slow down because of the duty that has been imposed on them. Car exports have been picking up to some extent.

Future projections portray an air of anticipation. Analysts contend that India’s oil requirements would touch 237 million tons by 2020 up from the present 138 million tons. Fertilizer imports together with coal will continue to go up and steel exports would touch 15 million tons by 2020 up from the present 3.2 million tons. What really drive India’s refining capacities are the diesel requirements for transport, agriculture and power stations.

The government’s determination to accelerate power generation by 52,000 MW capacities by 2012 in order to ensure electricity to every village in the country and the on-going augmentation process to enhance refining capacity will provide impetus to India’s international trade.

 

 
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