Indian Shipping Industry

The Shipping industry is highly co-related to the developments in global trade, therefore any adversity in the global economic growth adversely affects the prospects of global shipping fraternity thereby explaining the cyclical nature of the industry. With the world economic growth in CY11 estimated at 4% (at constant price), the sea-borne trading volumes (tonne-miles) are estimated to have been muted during CY11 growing at 4.3% on y-o-y basis.

The global crude oil demand for CY11 is estimated to have been 89 mb/d registering y-o-y growth of 0.8%. However, the oil demand from the OECD nations is estimated to have remained subdued averaging 45.6 mb/d recording de-growth of 1.3% on a y-o-y basis. On the other hand, the oil demand from the non-OECD nations is estimated at 43.4 mb/d posting growth of 3.1% on a y-o-y basis. Correspondingly, the crude oil supplies in CY11 are estimated at 88.4 mb/d registering a yearly increase of 1% thereby denoting lower cargo flow. To add to the subdued oil demand during CY11, the vessel deliveries during January-October 2011 aggregating 16.1 mn GT further aggravated the over-supply of wet bulk vessel fleet. This in turn resulted in decline in vessel freight rates to average US$2,330/ day during CY11 reporting y-o-y decline of 88.5%. The new-build orders in this vessel segment during January-October 2011 aggregated 3.5 mn GT reporting decline of 75.3% as compared to the same period previous year. Correspondingly, the orderbook position as on October 31, 2011 aggregated 46.7 mn GT declining by 24.8% as compared to the orderbook position as on December 31, 2010. Notably, the vessel scrapping activity in this segment aggregated 4 mn GT recording y-o-y de-growth of 27.3% as compared to the same period previous year primarily owing to the expiry of the phase-out timelines of single-hull vessels due to be scrapped by CY10.

With the demand for dry bulk vessels being derived from the demand for commodities such as coal, iron-ore, steel etc. the demand for dry bulk vessels remained subdued during CY11 on the back drop of fiscal and financial imbalances experienced globally. Correspondingly, the Baltic Dry Index (BDI) averaged1,548 during CY11 declining by 43.9% on y-o-y basis. Notably, the deliveries in this segment aggregating 43.3 mn GT recording growth of 23.7% as compared to the same period previous year further aggravated the vessel over-supply situation. The new-build orders in this vessel segment aggregating 12.4 mn GT during January-October 2011 declined by 61% as compared to the same period previous year. Correspondingly the orderbook position as on October 31, 2011 aggregated 122.4 mn GT declining by 18.9% as compared to the orderbook positions as on December 31, 2010. The scrapping volume during January-October 2011 aggregated 11.8 mn GT increasing by 4.7x as compared to the same period previous year.

The trend of containerisation has been gaining increased acceptance globally thereby replacing break-bulk/dry bulk mode of transportation. The development of container ports with greater draught and equipped with advanced cargo handling facilities can primarily be attributed to the said growth. The deliveries in this segment aggregated 11.2 mn GT declining by 18.2% as compared to the same period previous year. The freight rates of containerships 4,500 teu averaged US$20,167/ day registering y-o-y growth of 29.9%. Correspondingly, the new build orders during the period from January-October 2011 aggregated 17.9 mn GT growing by 3.1x as compared to the same period previous year. Of the same, the new-build orders for containerships>8,000 teu aggregated 13.2 mn GT accounting for 73.7% of the total new build orders. Correspondingly, the orderbook position as on October 31, 2011 aggregated 49.3 mn GT growing by 14.4% as compared to the orderbook position as on December 31, 2010. The vessel scrapping volumes during the period from January-October 2011 aggregated 0.5 mn GT recording de-growth of 68.7% as compared to the same period previous year, with no scrapping witnessed across containerships>8,000 teu.

The Indian Shipping industry too suffered set-back on account of the global downturn with the Indian shipowners faced with additional challenges in the form of: multiplicity of regulations, onerous tax regime, port congestion etc. However, in an effort to propel the growth of the country’s shipping industry, the Government of India (GoI) through the Ministry of Shipping announced the Maritime Agenda for the period 2010-2020. The total proposed investment under this programme is expected to be Rs.4.43 lakh crore of which an estimated Rs.1.2 lakh crore of investments are proposed for the shipping industry. In additions, the GoI through other regulatory bodies has initiated various programmes such as like National Rail Vikas Yojna (NRVY), National Highways Development Programme (NHDP) etc. for the development of port and other related infrastructure projects. However, the success of such initiatives depends upon their effective execution and timely implementation.

With the economic imbalances as witnessed across the developed nations of the world expected to prolong, CARE Research expects the sea-borne trading volumes to remain subdued growing in the range of 4.4-4.7% on y-o-y basis during CY12-14. In addition to the same, the factors such as orders in hand with the global shipyards resulting in constant flow of vessel deliveries during CY12-14 is expected to further worsen the over- supply position of global fleet thereby adversely affecting the vessel freight rates.

Global slowdown to affect the growth of sea-borne trade

Global fleet size to expand owing to order backlogs with global shipyards

Vessel deliveries to grow at a steady pace

Growing demand for bigger vessels – The transition phase

Existing overcapacities - leading to demand crisis

Outlook on the Wet Bulk segment

Outlook on the Dry Bulk segment

Outlook on the Containership segment

Onerous Tax Regime

Multiplicity of Regulations

Declining share of Indian shipping tonnage in India’s overseas trade

Declining cargo support

Manpower shortage

High Port calling costs

Ports congestion and connectivity with hinterland

Underdeveloped Coastal shipping

National Maritime Development Programme (NMDP)

Maritime Agenda 2010-2020

National Highways Development Programme (NHDP)

Dedicated Freight Corridor (DFC)

Region-wise Merchandise Trade – CY10

Global Merchandise Exports – CY10

Global Merchandise Imports – CY10

World POL Market Overview

Pattern Of Trade Flows

Global Wet Bulk Fleet: An Overview

- Global Fleet Size – Growth Trends

Developments during CY11

- Orderbook & delivery schedule

- New Orders & Deliveries

- Investments

- Scrapping Volumes

- Asset Prices: New- Build & Second Hand

POL Market – An Overview

POL At Indian Ports

Fleet Summary

World Steel Market

World Iron-Ore Market

World Coal Market

World Grain Market

Global Dry Bulk Fleet: An Overview

- Global Fleet Size – Growth Trends

Developments during CY11

- Orderbook & delivery schedule

- New Orders & Deliveries

- Investments

- Scrapping Volumes

- Asset Prices: New- Build & Second Hand

Indian Steel Market

Indian Iron-Ore Market

India Coal Market

Indian Grain Market

Dry Bulk Commodities - Indian Ports

Fleet Summary

Container Trade Overview

Pattern Of Trade Flows

Global Containership Fleet: An Overview

- Global Fleet Size – Growth Trends

Developments during CY11

- Orderbook & delivery schedule

- New Orders & Deliveries

- Investments

- Scrapping Volumes

- Asset Prices: New- Build & Second Hand

Container Volumes At Indian Ports

Fleet Summary

Container Volumes at Indian ports

Fleet Summary & Age composition

Bunker Expenses

Port Dues

Dry Docking, Repairs & Maintenance

Vessel Hire Charges

Employee Expenses

Insurance Expenses

Non- Operating Expenses

Profitability Margins

Wet bulk carriers

Dry Bulk Carriers

Containerships

Specialized Vessels

- Chemical carriers, LPG / LNG carriers

- Offshore vessels

Demand side factors

- World economic position

- Regional disparity

- Political events

- Natural disasters

Supply side factors

- Existing fleet size

- Scrapping of vessels

- Orderbook position and Capacity for Shipbuilding

- Fleet productivity

Choppy revenue streams

Capital intensive

Pricing Power

Regulatory requirements

Ways of Deployment

- Bareboat Charter cum Demise (BBCD)

- Time Charter

- Voyage Charter

Ship Financing

Tonnage tax

Vessel Flags

Flag of Convenience (FOC)

Shipping Corporation of India (SCI)

Great Eastern Shipping Company Ltd. (GE Shipping)

Mercator Lines Ltd. (MLL)

Annexure 1 Vessel Description

Annexure 2 Tonnage Tax

Annexure 3 Phase-out Time table for single Hull tankers

Shipping Terminology

World Fleet size projection

Delivery as % of existing fleet-Estimates

Estimation of excess fleet size

Estimates of cost recovery uptill CY13

Indian Shipping - Taxation regime

Multiplicity of Regulations

Average turnaround time at major ports

Maritime Agenda – Project details

Phase-wise details of NHDP

Status of NHDP

Region-wise global growth trends – GDP, Exports & Imports

Top – 10 Global Merchandise Exporting nations

Top – 10 Global Merchandise Importing nations

Sea-borne trade of oil & oil products

Orderbook & delivery schedule

Products – Import & Export trend

Indian Wet Bulk fleet as on December 31, 2010

Orderbook & delivery schedule

Indian Dry Bulk fleet as on December 31, 2010

Global Top-10 container service operators – CY10

Global Top-10 container terminals

Orderbook & delivery schedule

Bunker expenses as % of total expenditure

Port dues as % of total expenditure

Dry docking, Repairs & Maintenance as % of total expenditure

Vessel hire charges as % of total expenditure

Employee expenses as % of total expenditure

Insurance expenses as % of total expenditure

Interest & Finance charges as % of total expenditure

Depreciation as % of total expenditure

PBDIT margin (%)

PAT margin (%)

Category-wise no. of vessels owned and average age - as on March 31, 2011

Sea-borne trade and world GDP growth estimates

Expected delivery schedule by vessel segments – mn GT in %

Global oil demand estimates

Global steel production & capacity utilisation estimates

World Merchandise trade by region – CY10

World oil demand & supply

Break-up of oil demand

Break-up of oil supply

Global refining capacities

Crude oil proved reserves: continent-wise in %

Crude Oil – Imports & Exports (in mb/d)

Products – Imports & Exports (in mb/d)

Growth of global wet bulk fleet

New orders & Deliveries

Investments

Scrapping

Tankers( 310,000 dwt) – New-build and second-hand vessel prices

India – Oil production and consumption

Growth in oil imports

POL Traffic at major ports – Trend analysis

POL - Exports & Imports

POL Traffic as a % of total Import & Export traffic

Port-wise movement of POL – FY11 – mn tonnes in %

World Crude steel production

World Iron-ore production

Major Iron-ore Exporters – mn tonnes in %

Major Iron-ore Importers – mn tonnes in %

World Iron-ore Reserves

World Coal production

Major Coal Exporters – mn tonnes in %

Major Coal Importers – mn tonnes in %

World Coal proved reserves

World – Grain production & consumption

Major Grain Exporters – mn tonnes in %

Major Grain Importers – mn tonnes in %

Growth of global dry bulk fleet

New orders & Deliveries

Investments

Scrapping

Bulk carriers (170,000 dwt) – New-build and second-hand vessel prices

India - Crude Steel production

Finished Steel – Imports & Exports

India - Iron-ore production

Indian Iron-ore Exports

India - Coal production

Indian Coal Imports

India - Grain production

Dry Bulk traffic at major ports – Trend analysis

Dry Bulk - Exports & Imports

Dry Bulk traffic as a % of total Import & Export traffic

Port-wise movement of Iron-ore – FY11 – mn tonnes in %

Port-wise movement of Coal – FY11– mn tonnes in %

Port-wise movement of Fertiliser – FY11 – mn tonnes in %

Growth of Container trade vis-à-vis total sea-borne trade

Major East-West container trade routes

Growth of global containership fleet

New orders & Deliveries

Investments

Scrapping

Containerships (4,500 TEU)- New-build and second-hand vessel prices

Container traffic at major ports – Trend Analysis

Container volumes - Exports & Imports

Container traffic as a % of total Import & Export traffic

Port-wise movement of Containers– FY11 – mn tonnes in %

Indian Shipowners’ - Comparative cost analysis FY11

World economic growth and growth in sea-borne trade

Break-up of cargo (tonnes) carried by world fleet – CY2010

Break-up of cargo (tonnes) carried by world fleet – CY2000

Break-up of world fleet (dwt) by ship types – CY2010

Break-up of world fleet (dwt) by ship types – CY2000

Relationship between economic growth and growth in sea-borne trade

Growth of Indian fleet

Participation of Indian ships in India’s overseas trade

Break-up of Indian fleet (GRT) by ship type- CY2010

Break-up of Indian fleet (GRT) by ship type – CY2001

Indexation of vessel prices

Global marine financing volumes

Total Owned Tonnage

% Composition of fleet in dwt – FY11

Total Owned Tonnage

% Composition of fleet in dwt – FY11

Total Owned Tonnage

% Composition of fleet in dwt – FY11