The Hindu Business Line : Shipping industry may see only marginal rise in 2009 fleet tonnage

Mumbai Jan 26 Contrary to expectations, the growth of India’s combined shipping fleet in terms of gross tonnage has been almost flat in 2008, with fleet expansion being slower than earlier projected.

Although the impact of the global financial downturn towards the end of the year is not reflected in the fleet expansion for 2008, industry sources say 2009 will also see only a marginal increase, if not a dip, in fleet tonnage, as shipping companies are putting off or truncating their planned acquisitions. This is in the wake of the sharp dip in freight market rates since the financial upheaval rocked Wall Street, which tamed demand for freight movement.

Industry sources say that there was a meagre addition of 0.27 million tonnes of gross tonnage (GT) during 2008. India’s shipping tonnage increased from 9.03 million GT in 2007-end to barely 9.3 million GT towards 2008-end.

In terms of number of ships, it increased from 850 to 912 as on January 1, 2009, with the new entrants to the fleet being mostly smaller vessels.

Tonnage

An analysis of the tonnage expansion will show that in the first half of 2008, the tonnage in fact recorded a dip, as the number of ships that went to the scrap-yard outpaced additions to the fleet. In the second half of the year, however, the tonnage picked up and barely moved past the 2007 level. The present average age of Indian ships is 18.3 years, as against 18 years last year.

The current year is expected to see a further slowdown in tonnage accretion in the wake of the economic downturn. Some major shipping companies are going slow on their acquisition plans due to the dull freight market as also constricted access to finances. Even India’s largest fleet owner, Shipping Corporation of India (SCI), has put off purchase of some three to four ships this year, sources said.

Expansion target

This may upset the Government’s target for expansion of the shipping fleet during the Eleventh Plan.

“The Government had targeted a fleet of 12 million tonnes by 2012, but as of now, it looks that the target would have to be revised,” an industry source said.

Shipping companies do not expect the freight market to dramatically improve at least during the first half of 2009, which means ship owners will continue to postpone their proposed purchases.

The daily ship charter rates began to drop from August 2008, but took a steep fall in the last four months, especially in the dry bulk segment, in 2008.

Baltic dry index

The Baltic Dry Index, an indicator of the dry bulk market, fell to 8,934 in July 2008, a 12.8 per cent fall from the previous month. Thereafter, it fell to an average of 4,975 in September, a 32 per cent fall from the previous month and touched 1808 in October and 743 in December. It marginally rose to over 900 by the second week of January 2009.

The overall fall in BDI from July to December 2008 works out to about 90 per cent.