‘We have revamped operations to cut losses’

Shipping industry is still wading through choppy waters and it is unlikely to come out of the rough currents at least for the next three-quarters.

Indian shipping companies will also have to bide their time till the global scenario improves, given the global nature of the industry. Conserving cash has become a priority, even for the State-owned Shipping Corporation of India (SCI), argues Bidyut K. Mandal, the new Chairman.

Has the shipping industry’s health improved? What is in store for the Indian shipping industry?

Shipping industry is going through a very bad phase for the last two years. All segments of shipping — liner, break bulk and tanker segments — are going through a bad time.

Freight rates are low. The rate of scrapping has also gone up — there is 40 per cent more scrapping compared to last year.

But at the same time deliveries of new ships are taking place. So, net addition to the world fleet is positive. That is the problem.

Now the orders for new ships have come down. But for orders given earlier, delivery is still taking place. Global trade growth is not in line with excess capacity.

So, 2013 might still be a stressful year. One cannot expect remarkable improvement. Things might start improving by end of 2013 and in 2014. Being a global industry, Indian shipping is also as good or as bad as in any other country.

In the tanker segment, if you look at Swiss Max, Very Large Crude Carriers (VLCC) or Aframaxes, rates have not been really good.

But bunker expenditure, which is 35 per cent of the operational cost, has also come down. Except offshore, all other segments are going through a rough weather.

How is SCI battling the current slowdown?

SCI has been conservative in its financial management. We have a fleet strength of 79 vessels with 5.85 million dead weight tonnage (dwt). That is about 38 per cent of the total Indian tonnage.

Average age of the fleet has come down to 11 years. We have young fleet now, which means better acceptability in the market, less repair and maintenance and less fuel consumption.

Our offshore segment is making profit.

In the liner segment, we have done some restructuring. We are trying to increase the rates in certain European segment.

We have stopped making some calls at certain ports. We are trying to reduce the loss in unprofitable segments. But, in the bulk carrier and tanker side times are still difficult.

What is SCI’s plan to upgrade its fleet?

SCI has about 17 ships on order. Of these, two are VLCCs, three break bulk carriers, four container vessels and eight offshore vessels. All these deliveries will be completed by fiscal year (FY) 2013-14.

In FY 2012-13, we took deliveries of 11 ships and sent eight old vessels for scrapping.

Why is there so much focus on OSVs?

OSVs have markets. Oil and Natural Gas Corporation (ONGC) and other international companies also take these vessels, so deployment of OSVs is not a problem.

What about tie-up with oil companies?

We have Contract of Affreightment (CoA) with state-owned Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited. CoA gives the assurance of cargo over a period of time.

However, the rates are market determined.

We are also strong at managing vessels for other organisations.

So, is SCI looking to buy more assets because asset prices are low?

No, for most of the ships, the orders were placed in 2010. Yes, it is a right time to buy assets.

But now asset prices are low but financing is not easily available. When asset prices were high in 2006-07, it was very easy to get finance at lower cost.

Bank finance is not easily available now. Many banks have closed their windows for shipping companies.

There are very few international banks in the market willing to provide dollar loans to shipping companies.

We have to conserve cash in bad times. We have to consolidate our financials in the short-term. I cannot think about new investments at this point in time.

Can we expect a turnaround in the financial-performance of shipping companies in the near future?

In shipping, the top-line and the expenditure is not in your hand. At SCI, we are looking at cost-saving and restructuring wherever possible.

However, it is difficult to say that the turnaround will be immediate. (SCI posted a loss of Rs 75 crore on revenue of Rs 1,033 crore in the third-quarter ended December 31, 2012.)

For the industry, there is no significant change overall. Depending on the segment that is doing well in a particular quarter, things will go up or down for different companies in that particular quarter.

satyanarayan.iyer@thehindu.co.in

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