Essar Shipping eyes fleet expansion

Essar Shipping Ltd is weighing plans to expand and diversify its fleet by acquiring a panamax size bulk carrier, a medium range oil tanker, and a Suezmax carrier, said Ranjit Singh, Executive Director and Chief Executive Officer.

The expansion plan, focussed more on the liquid side, though, will be subject to securing long-term cargo transportation contracts, Singh told BusinessLine . “That’s the ideal way to expand tonnage on the back of long-term contracts,” he stated.

Essar Shipping will bid on the tenders issued by Indian Oil Corporation Ltd (IOCL) and Bharat Petroleum Corporation Ltd (BPCL) for hiring a very large crude carrier (VLCC) and a Suezmax tanker for five years with options for two more years from Indian fleet owners.

“If we win the contract, we can look at buying an additional VLCC or a Suezmax tanker,” Singh said.

Essar Shipping currently runs a fleet of 14 ships, mostly bulk carriers, comprising one capesize (170,000 tonnes), six mini capes (105,000 tonnes each), one panamax (75,000 tonnes), two supramaxes (55,000 tonnes each), two handymaxes (12,000 tonnes each) and two VLCCs.

Of these, one VLCC, the capesize and the panamax vessels and the two handymaxes are registered under the Indian flag. The remaining nine ships fly Cyprus, Liberian and Marshall Islands flag.

The average age of the firm’s fleet is 12 years.

The firm is also looking to tap the rising demand for moving petroleum products along the Indian coast for local consumption. “If a Contract of Affreightment (CoA) comes from State-run firms, that can help us acquire product tankers for deployment on the coast,” Singh said.

Under the CoA, a shipowner or operator agrees to transport a given quantity over a fixed period of time. Unlike other charters, no specific ship is named in the charter. It is up to the owner or operator to provide ships as needed for the contract.

Essar Shipping will scrap its 25-year old capesize ship over the next 18 months and replace it with a younger panamax ship.

The fleet renewal plan, according to Singh, is also aimed at raising the share of the third-party cargo hauled by the carrier. Currently, 70 per cent of the cargo transported on its ships belong to the parent Essar group, while the balance is third party cargo.

The firm is expected to transport 18 million tonnes (mt) of cargo in FY18 from 13.06 mt a year ago, aided by strong coastal cargo movement where Essar Shipping has a 20 per cent share. Since April, it has moved 10.24 mt of cargo.

Essar Shipping has been hit by the bankruptcy proceedings involving ABG Shipyard Ltd where it had ordered four new supramax vessels (54,000 tons each) in 2011.

“At this moment, we don’t really know when those ships will be delivered to us. There is also no clarity on the oil drilling rig ordered at ABG Shipyard a few years ago. ABG has gone under NCLT. Things are hanging over there. The rig construction is almost 80 per cent completed. They are working in all directions. Let’s hope some solution comes out of it,” Singh added.

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