The Hindu Business Line : Mercator to sharpen focus on dredging, coal mining

Mumbai April 16 With the global freight market remaining dampened due to recessionary trends, Mercator Lines, India’s second largest private shipping company, has decided to sharpen focus on its other businesses — dredging and coal mining.

The company recently entered the coal mining sector by acquiring three mines in Indonesia and one in Mozambique, as part of its backward integration initiative. “We are into transportation and handling of coal. So we decided to get into coal mining,” Mr H.K. Mittal, Chairman of Mercator Lines, told Business Line.

The company plans to produce between 1.5 million tonnes (mt) and 2 mt of coal from its Indonesia mines in the current fiscal. “Over the next three to four years, we will be ramping up production to 10 mt tonnes through acquisition of more mines,” Mr Mittal said.

The Mozambique mine, where production is yet to start, is spread over an area of 180-sq.km, with estimated recoverable reserve of one billion tonnes.

To acquire more dredgers

The company also plans to enhance its focus on dredging business, seeing major opportunities in the domestic dredging market as Indian ports plan to expand capacities and new ports are in the pipeline. It plans to add two new dredgers to its fleet of four in the current quarter — at a cost of $110 million.

Within the next three years, Mercator plans to expand its dredging fleet to 10, which will include both cutter suction and trailer suction dredgers. Earlier, the company leased out the dredgers to Dredging Corporation of India (DCI), but now it operates these vessels on its own.

The company has not postponed its acquisition plans despite recessionary trends. “On the contrary, we feel this is the best time to buy assets. Lots of second-hand ships are available at much lower prices as compared to some months ago,” said Mr Mittal. .

Ships can be purchased at prices 20 to 50 per cent lower depending on the category of vessels. New ships at different shipyards were also available, as the owners could not pursue expansion plans due to tight liquidity position.

The company, which spent $310 million to acquire new assets, including a very large crude carrier, will be buying a few bulk carriers this fiscal. Financing, however, was still a problem, he said.

Sharp fall in tanker rates

While the dry bulk market is showing some signs of improvement, tanker rates fell sharply in the last three months. The average charter rate for a VLCC fell from $44,065 per day in January 2009 to $30,672 in February and $25,177 in March. On April 8, the VLCC rate was ruling at about $10,536 per day.

The Baltic Dry Index, which measures the dry bulk freight rates, increased from 1818 in February 2009 to 1958 in March. The rates are just about sufficient to meet the operating costs of shipping companies, say industry analysts.

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