The country’s biggest ocean carrier, the state-run
Shipping Corp. of India Ltd, plans to sell up to 13 ageing vessels for breaking
by March as it looks to shore up performance.
“Our plan is to sell 15–17 ships this fiscal, out
of which we have sold 4 ships so far,” said Arun Kumar Gupta, a director at
Shipping Corp.’s technical and offshore division. On average, these ships are 25
years old.
SCI runs a fleet of 82 ships, including bulk
carriers, oil tankers and product and chemical carriers. It has another 26
ships under construction at various Indian and overseas yards.
Globally, fleet owners are disposing uneconomical
assets as new ships enter service at a rapid pace and increase the number of
modern, more efficient vessels.
As a result, charterers (those hiring ships) are
showing less preference for ships built 20-25 years ago.
Shipbreakers globally have chopped up
ships with a combined cargo-carrying capacity of 33 million dead weight tonnes,
or dwt, since January, a 64% increase over the same period last year, according
to London-based Clarkson Research Services, a unit of Clarkson Plc., the
world’s largest ship broker.
In terms of numbers, 786 ships have been demolished
globally so far this year, compared with 732 in the same year-ago period.
The main driver behind the rise is a near threefold
surge in dry tonnage (capacity) sold for scrap, which has risen 290% to 19.6
million dwt this year, Clarkson Research said.
“It is not viable to operate 25-year-old ships
because charterers do not want vintage vessels,” Gupta said. “We have to spend
more on repairs and maintenance of older ships. Besides, the acceptability of
such ships at ports is less. When freight rates are under pressure, there is no
point running older ships and keep sustaining losses.”
Shipping Corp. reported a loss of Rs.146.46 crore
for the 1st half of this fiscal year, compared with a net profit of
Rs.450.46 crore a year earlier.
It earned Rs.32.41 crore from the sale of 2 of the 4
ageing ships in the first half, compared with Rs.143.49 crore from the sale of
6 ships a year earlier. The other 2 ships were sold in October and the sales
will be recorded in the 3rd-quarter results.
Much of the losses (Rs.140.6 crore) came in the 2nd
quarter when the firm sold just 1 ship for scrapping, earning Rs.20.13 crore, compared
with Rs.128 crore earned in the year-earlier 2nd quarter from the
sale of 5 ships.
In the year to March 2011, Shipping Corp.
earned Rs.200.98 crore from the sale of 8 ships for dismantling.
Shipping Corp.’s finance director B.K. Mandal
explained that the main contributors for the 2nd quarter loss, apart
from depressed freight rates, were lower income from the sale of ships, higher
depreciation and ship fuel costs, and an increase in the interest cost due to
the revaluation of foreign currency loans.
“In a dire market, (both dry bulk and tanker) owners
may opt to scrap even younger vessels due to weak freight markets,” said Erik
Stavseth, a shipping analyst at Oslo-based investment bank Arctic Securities
ASA. Stavseth said there are three ways to restore the supply-demand balance
and help return the shipping industry to profitability. These include scrapping
vessels, laying up ships and refraining from ordering new ships.
Shipping Corp. has lost more than half of its value
on BSE this year, while the Sensex has shed about 20%.
On Thursday, Shipping Corp.’s shares fell 1.5% to
Rs.61.45 on BSE and the benchmark index dropped 1.9% to 16,461.71 points.
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