Ports need deeper draft to attract bigger ships

Efforts by domestic coal importers to source the raw material from new markets, such as Russia and Colombia, are being stymied by inadequate draft depth and the lack of other handling infrastructure at Indian ports. With coal-exporting countries increasingly favouring bigger vessels to ship the raw material for economic reasons, Indian importers are not able to clinch the big deals.

This is because most coal-handling ports in India can accommodate only the smaller Panamax vessels, given the draft limitations. And because of this, the costs involved in importing raw materials to India are spiralling. This, in turn, is putting the squeeze, in terms of cost of production, on users such as power and steel plants.

BIGGER VESSELS

Industry players feel that with coal imports set to rise in the coming years, it is vital that the Indian ports increase their draft to a minimum of 18 metres to accommodate Capesize vessels of about 1.50 lakh deadweight (DWT), instead of relying on the smaller Panamax vessels of 75,000 DWT to ship the coal.

At present, Gangavaram port in Andhra Pradesh and Mundra, in Gujarat, on the west coast, are the only two ports that can handle the bigger vessels, as they have natural draft. However, other coal-handling ports such as Visakhapatnam and Dhamra, in Orissa, are in the process of increasing their draft depth to make coal imports more economically viable, by allowing bigger vessels to berth.

According to recent estimates, India's coal imports could surge nearly 70 per cent in this fiscal to 142 million tonnes, from about 85 million tonnes last fiscal. This reflects a significant jump from the estimate of a 104-million-tonne shortfall for 2011-12 made a few months ago.

It is clear that Capesize vessels will be increasingly deployed to ship coal, in light of the rise in international prices of raw materials. Last week, the Baltic Panamax Index was hovering at 1,534, while the Baltic Capesize Index was at about 1,851.

“In other words, for a marginal difference in freight rates, you can ship double the parcel of a Panamax vessel by using the bigger ships. Shipping coal on a Capesize vessel from Australia to India can work out cheaper by $5-7 per tonne compared to moving the material on a Panamax vessel at today's spot prices,” Mr Pranav Choudhary, Chief Financial Officer of Gangavaram port, told Business Line .

He said Gangavaram port was at present getting at least five Capesize vessels a month and the number was increasing. The port handles 10 million tonnes of coal imports (both thermal and coking), with plans to expand the handling capacity to 25 million tonnes, as part of its overall expansion programme.

Deployment of the bigger vessels has other advantages as well. For instance, ports in Australia, a major exporter of the material to India, give priority berthing to Capesize vessels, as there is always some amount of congestion and resultant waiting period for vessels.

While a Panamax vessel may not get a berth without a wait of 15 to 20 days, the bigger vessels can get a berth in 8 to 9 days. “All these add to the cost of coal transportation on Panamax ships,” Mr Choudhury pointed out.

As coal importers are now seeking out new markets to buy the material, the need for Indian ports to have the capacity to handle Capesize vessels is being increasingly felt.

RUSSIAN LINK

For instance, Adani Enterprises, the flagship company of the Adani group, which imports about 30 million tonnes of coal from Indonesia, Australia and South Africa, has started to look for alternative markets in Colombia and Russia. Last year, it did import a consignment from Colombia, but it did not turn out to be economically viable, given the longer distance it had to travel.

The company is now looking at Russia to source the material. Even though Russian coal can be purchased at discounted prices compared to Indonesian or Australian coal, the insistence of Russian exporters on deployment of larger size vessels is coming in the way of clinching major import deals.

For Russian coal to be brought to India, it is important to deploy larger vessels, as it takes some 23 to 25 days to haul the cargo from Russia, while it is just 16 days from Australia.

The Adanis are now planning to import from Russia via the Pacific Ocean route to reduce freight costs, but the fact remains that unless Indian ports can handle Capesize and even larger vessels, this route of import cannot be used on a long-term basis.

Trading companies, such as Kolkata-headquartered Visa Group and Nagpur-based Gupta Coal, apart from steel and power producers, are also exploring import opportunities from Russia.

DREDGING PROJECTS

Indian ports that handle significant quantities of coal are, on their part, speeding up their dredging projects to increase draft. Visakhapatnam port, which handles approximately 18 million tonnes of coal, has taken up a Rs 400-crore dredging programme to increase its draft to 20 metres in the outer harbour and 15 metres in the inner harbour.

“After the dredging project is completed by December 2012, we will have one of the best drafts in the country. We are also implementing a Rs 1,100-crore coal-handling mechanisation programme on the three berths used to handle the material. The first of the berths will have the new mechanised facility by September 2012, and the remaining two will be completed by March 2013,” Mr Ajeya Kallam, Chairman, Visakhapatnam port, told Business Line .

Apart from increasing draft depth, Indian ports should also strengthen handling facilities and improve rail connectivity to the hinterland, if they are to handle Capesize vessels, which will clearly dominate dry bulk cargo movement in the coming years.

(With inputs from Virendra Pandit, Ahmedabad)

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