Smoother sailing for shipping

By Ramnath Subbu

MUMBAI, FEB. 3. After passing through a recession for the last couple of years, Indian shipping companies seem to be showing definite signs of recovery. While the dry cargo freight rates have been ruling firm, it is the buoyant tanker market that is responsible for most shipping companies turning out good shows this year. For example, the rates for Suezmax tankers have been scaling record highs with spot rates for such vessels in the range of $65,000-70,000 per day against the year ago time charter rates of around $40,000 a day.

This has been largely aided by the soaring prices of crude during the closing months of 2000 and the high demand for petro- products. In the Indian context, the firmness in freight rates has mainly due to the increase in oil refining capacity and the jump in crude imports.

While shipping as a whole had been beset with problems in recent years, individual companies had their own problems to contend with. Some companies had in the past raised huge amounts of capital in the form of equity while others have had problems within the groups they belong to.

However, in tankers, there has been a significant growth over the years and players have concentrated on acquiring specialised vessels for carrying specific products such as edible oil, acid and the like.

Besides, the huge capacity of Reliance's Jamnagar refinery and the expansion of many public sector refineries based on imported crude will be increasing the demand for tankers, both Indian and foreign.

Another favourable development for Indian shipping is the emergence of liquefied natural gas (LNG) as a lucrative business. India is expected to become a major importer of LNG in the coming years. Already, LNG terminals are in the process of being set up in places such as Dahey, Kochi and Dabhol.

A look at the performance of the leading players in the industry in the current fiscal points to a definite change in fortunes.

The public sector Shipping Corporation of India's (SCI) net profit of Rs. 129.18 crores for the quarter ended December 2000 is a significant jump over Rs. 9.87 crores in the corresponding period in the previous year. This is the highest ever profit earned in a single quarter since the inception of the company. SCI accounts for more than 40 per cent of India's shipping tonnage.

Announcing the results, Mr. P. K. Shrivastava, managing director, said besides a buoyant freight market, cost cutting and disposal of non-performing assets contributed to the record earnings. Earnings from tanker operations account for around 70-80 per cent of the revenues.

The net profit for the first nine months had jumped to Rs. 232.15 crores from Rs. 76.80 cores in the same period last year. Income for the period had risen to Rs. 2,203 crores from Rs. 1,896 crores earlier.

SCI's passenger division which was making losses for the past several years also turned the corner in the third quarter.

The company has eight ships under construction and has sought Government approval for buying another five ships including a very large crude carrier and the strategy is to become a more focussed company in future.

GE Shipping in the private sector has interests in tankers, dry cargo carriers and offshore supply vessels (OSVs). The company has expanded its OSV segment and is planning a foray into LNG transportation. It has ordered three Aframax crude carriers and two OSVs costing $140 million.

The company operates a diversified fleet comprising 17 tankers, one LPG carrier, 18 bulk carriers, 15 offshore support vessels and 10 tugs totalling 1.5 million dwt.

Higher charter earnings from crude and product tankers pushed up its net profit to Rs. 42.54 crores in the third quarter from Rs. 18.60 crores in the corresponding period last year.

Earnings from tanker operations accounted for around 70 per cent of the company's profit and firm time charter rates for tankers are expected to continue for the next quarter.

Total income during the quarter was Rs. 247.28 crores against Rs. 272.72 crores which included Rs. 52.02 crores from marine construction project. and income from sale of ships was Rs. 4.57 crores.

Essar Shipping (ESL), following the hiving off of the Vadinar port terminal project as Essar Tankers, is focussing on its core competence. The company has a presence in the dry cargo and tankers business.

Its net profit for the first nine months was up smartly at Rs. 50.54 crores against Rs. 14.20 crores in the same period of the previous year. The company benefited largely from higher freight earnings, particularly from its Suezmax crude carriers. Profit from operations rose by Rs. 62.85 crores due to increase in net charter earnings and reduction in lease / bare boat rentals and other expenses.

According to the company, the port and terminal project at Vadinar has been transferred to a wholly owned subsidiary with effect from October 2000.

ESL deployed most of its vessels in the international market, enabling it to capitalise on the rising charter rates. Its strong presence in the Suezmax tanker market drives its profitability.

Varun Shipping Company (VSCL) reported a net profit of Rs. 9.70 crores for the nine months ended December 31, 2000 against Rs. 7.23 crores in the corresponding period of the previous year. Income from operations was Rs. 152.68 crores (Rs. 133.65 crores).

Varun Shipping is mainly in the petroproducts tanker segment, dry bulk carrier, LPG carrier and offshore segment. It plans to acquire second-hand vessels to strengthen its fleet and diversify the gas operations by entering the LNG market. The company has already a budget of Rs. 95 crores for ship acquisition of which Rs. 28 crores will come from a rights issue.

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