MAJOR PORT STATUS MAY BE ACCORDED TO THE ANDAMANS

The Union government proposes to accord Major Port status – the thirteenth - to the Andaman, Nicobar and Lakshadweep Islands. It plans to categories the Andaman Lakshadweep Harbour Works (ALHW) as a Major Port Trust.

At present, ALHW operates as a Department of the Shipping Ministry and has to take its approval for every work.

The proposal is expected to go to the Cabinet soon.

If the Cabinet approves of it, ALHW will be the 13th Major Port Trust and in charge of handling cargo shipped to and from the three islands.

FRONTLINE STARTS OPERATIONS IN INDIA

Frontline, the Bermuda-based world’s largest tanker company the first global tanker company has become to set up its own operations in India, said Mr. Jens Martin A. Jensen, CEO and MD Frontline Management AS, which has nearly 80 large tankers in its global fleet.

Till-now, operations of all Frontline ships have been outsourced with officers and crew recruited from India and other countries such as Russia and the Philippines. The company has started hiring Indian Marine officers.

INDIAN OWNERS ON VESSEL ACQUISITION SPREE

Indian shipowners appear to be on a vessel acquisition spree, having purchased 27 vessels during calendar 2009, added another eight during the first two months of 2010, and are expecting to buy at least another 25 vessels in the remaining 10 months companies like shipping Corp of India (SCI), Great Eastern Shipping, Mercator Lines, Essar Shipping, Five Star Shipping, Arcadia Shipping and Pratibha Shipping have, between them, added eight ships to their respective fleets, including tankers, bulk carriers and one very large crude carrier.

However, even such large scales additions to the Indian fleet may not cause a substantial increase in the country’s tonnage which had stood at 9.31 million grt (equivalent to 15.36 million dwt) as or January 1, 2010 due to a number of planned scrapings of aged vessels and the enforced retirement of several single-hulled tankers, which need to go out to service by end-2010 as per the IMO’s diktat.

DG SHIPPING EXTENDS HELPING HAND TO SHIPOWNERS

DG Shipping, Lakshmi Venkatachalam has extended a helping hand to Indian Shipowners who are facing financial problems to expand their fleet. She did this by recommending innovative lease agreements and hinting at further fiscal incentives. However, the attractiveness of the tonnage tax has been offset by the burden of other dozen taxes. She also said that it is time to look for others things and they are working to modify the framework to see in what way they can improve the tonnage and one option is by way of bare boat charter.

A bare boat charter agreement is nearly the same as a wet lease where a shipowner prays operational costs in installments for a certain period of time after which is owns the vessels crapping the huge capital outgo at once. Meanwhile, the shipping ministry has also set up a panel in order to look into possible changes in the shipping laws which currently permit companies to own only 49 pc of their entire fleet as chartered. There are some regulatory constraints but those can be addressed while it certainly is a good mechanism for tonnage acquisition.

STILL A LONG HAUL AHEAD FOR INDIAN SHIPPING

With tankers, bulk carriers and container ships’ supply exceeding demand, and with freight and charter rates sinking, the domestic shipping industry is still wallowing in hot water.

“Demand for Indian shipping is going to remain subdued in 2010 and 2011 due to the decline in overall global trade volumes,” says a Fitch ratings report which has rated the sector ‘negative’ for this calendar year.

Global trade volumes are expected to be range bound, charter rates will remain low and pressurize the margins, it adds.

Nevertheless, since March 2009, there has been significant improvement in freight rates; including those of very large crude carriers (VLCC’s) and Aframax tankers.

A long-term charter contract have slightly reduced volatility, and has provided some revenue visibility. Therefore, with charter rates volatile, shipping companies now prefer long-term contracts.

Companies with long term contracts have received softer buffets from sharper declines. Such contract generally have a tenure of around one year and charter rates may come down upon renewal of contracts.

The shipping industry may have to line up further capital expenditure because about half of the cargo ships under the Indian flag have to be phased pit, in line with the International Maritime Organization’s (IMO) directive to replace single hull ships with double hulled ones.

Still, few shipping companies have the wherewithal to purchase new vessels, due to limited availability of funds and the reluctance of banks to lend to this sector.

“Order cancellations, postponement, and the phasing-out of single-hull vessels have to some extent affected the availability of excess capacity, but the global shipping market is bound to face excess supply over the medium term,” observed Fitch.