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Varada Bhat

Mumbai, June 21 With the global shipping industry facing rough weather, Shipping Corporation of India (SCI), the country’s biggest shipping firm by fleet size and revenues, has shelved its plan to purchase four very large crude carriers (VLCCs) worth $320 million.

In October 2008, the company had floated tenders for acquisition of four VLCCs and over nine shipyards had expressed interest, said a senior official from SCI.

However, the credit crisis and the economic slowdown had forced the company to defer the plan for six months. Meanwhile, the freight market also took a turn for the worse, upsetting SCI’s calculations.

Capt K.S. Nair, Director – Bulk carrier and tanker division, SCI, said, “Seeing the present market conditions, we are not going to place the orders. We will see how the market moves in the next few months and then decide,”.

On Friday, SCI’s scrip on the BSE closed at Rs 119.85.

Analysts feel the demand for vessels is dropping due to the global economic slowdown that has hampered trade.

Freight rates for tankers have fallen by around 40-60 per cent over the past six months.

“With weak oil demand in some countries, tanker rates will remain under pressure,” said an analyst with the Mumbai-based broking firm.

Industry experts also feel that when the oil was around $32-35 a barrel, many shipping companies had used their VLCCs as storage tanks to store oil to arbitrage futures.

“Suddenly when the price went up to $60-70 a barrel, they sold it and there was a surplus tonnage of VLCC available in the market. As a result, the tanker rates went down. This is a temporary phase,” said Capt. Nair.

But the overall long-term view by analysts suggests, unless the oil consumption in the US increases, chances of recovery are bleak.

Other Indian ship-owners have also cut down their acquisition plans this year.

Varun Shipping has slashed its capex from $400 million to $100 million while Great Eastern Shipping will buy just a tanker worth $52 million in this fiscal.

More Stories on : Petroleum | Shipping/Ports | Shipping Corporation of India Ltd

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