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Tuesday, October 11, 2011

India shipping firms eye expansion in dire market

Tue Oct 11, 2011

* Indian shipping firms eye low asset prices
* Shipping Corp of India says will keep buying vessels
* India looking to nearly treble port capacity by 2020

By Aniruddha Basu and Siddesh Mayenkar

MUMBAI, Oct 11 (Reuters) - Indian shipping firms are planning to expand their fleet to take advantage of falling vessel prices and a sharp downturn in the global freight markets, industry executives said on Tuesday.

India's shipping firms view the difficult economic environment as a buying opportunity, as they expect to see a huge boom in seaborne trade in Asia's third largest economy over the next decade.

"We will look at expanding our fleet because asset prices are low, but it has to be strategically done," said Yudhishthir Khatau, vice chairman and managing director of oil carrier Varun Shipping , on the sidelines of the India Shipping Summit.

"With added capacity, we still have to face low freight rates."

A flood of new vessels this year has pushed the crude tanker market to unprecedented lows, with average daily earnings falling to negative territory for the first time.

A similar situation is expected to hit the dry bulk market over the next few months, as industry experts believe the oversupply of ships will reverse a recent rally.

Despite the adverse market conditions, state-run Shipping Corp of India has not received any directive from the government to stop acquiring vessels, a top official said.

Shipping Corp of India has an order book of 28 vessels, worth around $1.4 billion, for delivery by 2013/14 and plans to order at least 10 more vessels, said Chairman and Managing Director S Hajara.

India's shipping industry is considered vital to the country's efforts to secure the necessary crude oil, coal and other commodities necessary to maintain its strong economic growth.

In preparation for this fleet expansion, India expects to boost port capacity to 3.2 billion tonnes by 2020 from the current 1.1 billion tonnes, Shipping Secretary K. Mohandas said at the conference.


One of the biggest risks facing the growth of India's shipping industry is the threat of piracy, which is becoming more pronounced off the country's southwest.

Pirate attacks on oil tankers and other ships are costing the world economy billions of dollars a year and navies have struggled to combat the menace, especially in the vast Indian Ocean. Experts say seaborne gangs are set to ramp up attacks in the area after the monsoon season abates.

Maritime insurance premiums have increased due to the growing risks, but experts believe the added costs will not significantly impact India's shipping industry for now.

"The Indian market is relatively young and so will survive for awhile without paying too much premium," said a foreign insurance broker, who wished not to be identified.

Around 90 Indian seafarers have been taken hostage this year and 50 are still in captivity, according to the International Chamber of Shipping.

India has stationed a warship near the Gulf of Aden which has thwarted dozens of hijacking attempts and escorts vessels passing through the region. India is also detaining more than 100 pirates captured in rescue operations.

(sourced Reuters)

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