Revival of the Maritime Industry within reach
Experts see several options that can help bring about a turnaround of the industry despite the present downturn
The current lackluster phase experienced by Indian shipping is expected to drag on for another two years at least. Earnings will bump along the bottom of the market. Ship owners don’t see returns from acquisition in any significant way. A recent study undertaken by some ship owners indicate that ship utilization continues at around 83% in general when a 90% to 95% would offer a healthier pattern of operation. However, long term ship owners need to keep their vessels young in order to be ready for the market when the turnaround takes place.
This long lifeless phase has seen some of the stalwarts in shipping closing shop or getting deeper into the red. Already Jasu Shipping Company, Varun Shipping, Prathibha Shipping and others have either got their licenses of some of their ships cancelled by the Director General of Shipping, the Indian Maritime Administration, for lack of a seaworthy certificate and in the case of Varun Shipping, almost got their “Documents of Compliance’ withdrawn. But experts postulate the early revival of the industry is not much of a challenge.
Everyone is watching India’s economic revival and India can make the change like China has done. Among the top shipping companies in the world, China ranks 9 and India is 23. China with the highest population in the world has a coastline of 14,000 km whereas India with the second highest population has a coastline of 7500 km. Worse is that Indian ships carry less than 9% of the India’s oversea’s trade.
Ship building is seen to act as a catalyst to overall growth as it has enormous job potential. In China which builds over 900 vessels has made a transformation on the job front. Vice Adm. S. K. K. Krishnan, former Chairman of Mazagaon Dock and Independent Director of Cochin Shipyard recommends that since Indian shipyards lack orders they should concentrate on building smaller vessels, especially the high technology offshore vessels as well as vessels for the dredging industry. “Government of India should go out of their way to deepen the approach channels of the major ports, which in turn will give a fillip to the dredging industry,” he said.” Unless more orders come up for ship building, the industry cannot expect to grow. Unless the government ensures that more Indian built ships operate in the Indian waters, nothing positive can happen.”
With renewed focus on cost, ship owners can make the most of their existing tonnage through upgrades, retrofit and conversions. Akshay Jain, CEO of Vedam Design advocates a pragmatic and effective approach towards ship repairs, at the same time cautions that instead of directly going for repairs work it is better to undertake a survey of the ship to identify first the extent of the repairs to be under taken. “More importantly carefully select the ship repair yard and make a comparison of the cost, capability and the technical advantages.” He suggests that all options for retrofitting and ship conversions should be considered in detail as they offer opportunities for bringing in good returns to the ship owner. By taking the time to gain in-depth knowledge of the customer’s needs, one can ensure optimal vessel performance by upgrading the right hardware and software systems.
“India’s trade has tripled in the last 10 years,” points out Capt Kapil Kekre, Advisor – Commercial to the Indian National Shipowners' Association (INSA). “Unfortunately, Indian ships carry less than 9% of India’s international cargo and there is lot of scope for growth with the government’s support. There is tremendous scope to build up tonnage especially to carry crude oil. Our own need for oil transportation over longer distances exists unlike other countries. Advance planning of voyages for carrying crude oil will help both the ship owners as well as the consumers. Thus, there is good opportunity for oil transportation that needs to be planned in advance and India should not lose out on this opportunity.”
India is the fourth largest steel producer in the world and is expected to climb to the second place soon. CRISIL Research estimates domestic steel demand growth at 6-7 per cent CAGR between 2013-14 and 2017-18 compared with around 9 per cent CAGR over the last decade. This rate of increase will see steel demand in India touching 93-94 million tonnes by 2017-18. Since incremental demand for finished steel is expected to be considerably lower the demand-supply gap will widen, when majority of the planned capacities are scheduled to be commissioned (16 million tonnes in 2013-14 and 8 million tonnes in 2015-16).
“The steel industry is facing raw material and water scarcity,” informed P. Raychaudhury, Executive Director of Steel Authority of India. “Land issues, environmental protection etc., could pose a problem. Besides, coking coal available in India is not suitable for steel production. The demand is expected to go up by 2025 – 26, factoring an average GDP growth of 7%. But these are issues of little consequence considering the immense potential steel offers to the Indian shipping. A turnaround is not impossible and very much in the hands of stakeholders if they play the cards right.