Indian shipping yards gain big on soaring order

Source: Business Standard

Over 290 per cent rise recorded in the last 18 months.

With leading shipyards in Korea, China and Japan booked till 2012-13, the Indian shipbuilding industry has witnessed an over 290 per cent surge in orders in the last 18 months.

The industry’s order book has risen from 0.84 million gross tonnage in 2006 to 3.3 million gross tonnage, taking it to the eighth rank in the world (it was not in the top 20 at the start of the 18-month period) in terms of the order size.

Experts say with Korea, the market leader with an order size of 134 million gross tonnage, booked till 2013, and Japanese shipyards, with an order size of 74 million gross tonnage, booked till 2013-14, Indian shipyards are getting huge orders for bulk carriers and offshore vessels. Indian shipbuilders’ order books are full till 2012.

“A surge in demand for oil and increased exploration planned by oil companies has generated a huge demand for offshore support vessels,” said Dhananjay Dattar, chief financial officer, ABG Shipyard. He added the ageing fleet of crude oil carriers was also behind the rise in demand.

International Maritime Organisation (IMO) stipulates that all vessels more than 20 years old have to be replaced while all single-hull vessels have to be replaced by double-hull vessels by 2010.

The new demand for offshore vessels till 2012 is estimated to be 6.3 per cent of the current fleet size of 3.95 million dead weight tonnes (DWT) while the replacement demand on account of the IMO regulations is pegged at 61.8 per cent of the current fleet size.

A senior executive with Bharati Shipyard, said: “We continue to look at the offshore vessels segment as the most prospective area. Around 70 per cent of our order size is accounted for by offshore vessels and we are planning to invest Rs 1,000-1,200 crore over the next two to three years.”

Increase in commodity trade and strong demand for iron ore from China has resulted in a rise in demand for dry-bulk vessels. The new demand for dry-bulk vessels is pegged at 6.8 per cent while the replacement demand is estimated at 10 per cent of the current fleet size.

But there are others who are more cautious. M Jitendran, chairman and MD, Cochin Shipyard, said: “We cannot expect the same level of growth that we have seen in last two years. Still, with growing international trade and commerce and higher charter rates, the momentum in the shipping industry will continue for some more time”.