Mumbai: Mumbai-based Mercator Lines Ltd, India’s second-largest private shipping firm by fleet size, plans to trade in coal by owning coal mines or entering into a tie-up with coal suppliers abroad in a bid to protect the long-term interests of its coal carriers.
“Shipping assets are high-cost assets. We want to tie up with coal mines abroad to guard our core shipping business. This will ensure that our bulk carriers that transport coal are not affected by market fluctuations and that we get better returns,” said H.K. Mittal, chairman and managing director, Mercator Lines.
By doing this, Mercator is trying to introduce in the coal sector a concept that is prevalent in liquefied natural gas (LNG) business where the energy chain is integrated from production and shipping to consumers.
Mercator is understood to be talking to coal mine owners and suppliers in Mozambique but Mittal declined to give details. The company has four Panamax bulk carriers that can carry 70,000-73,000 tonnes and one Kamsarmax carrier that can haul 82,500 tonnes of coal. One more Kamsarmax bulk carrier will be inducted into the fleet in June. All these bulk carriers are registered in Singapore and operated by the firm’s 100% Singapore subsidiary Mercator Lines (Singapore) Pte Ltd Geared ships, such as the ones Mercator has, and can load and unload cargo without assistance from the shore. Geared Panamax ships bring economies of scale since larger quantities of coal can be carried at a time when compared with a geared Handymax bulk carrier that can load between 48,000-56,000 tonnes of coal.
Mercator has signed a four-year contract worth Rs1,000 crore with Tata Power Co to haul 1.7 million tonnes (mt) of coal a year from Indonesia to its power plant here. The coal transportation quantity will go up by an additional 1mt when Tata Power starts operating an additional plant here within a year. It also ships 1.7mt of coal from Indonesia for Maharashtra State Electricity Board.
Mercator is already a major player in the coal logistics segment that involves moving coal from the supply port to the power plant in India including internal logistics and transportation. “We hire barges, tractors, excavators and take the services of the Indian Railways to undertake this task and take control of coal shipments,” says Mittal.
Mittal said that Mercator planned to list its Singapore subsidiary shortly as part of a $500 million (Rs2,100 crore) expansion programme. “We are keen to finish the listing in the next four to six months but we have time, up to two years,” he noted.
The issue size will be $150 million. Out of this, the company has already raised $51 million through a convertible bond issue that was subscribed by institutions such as Lehman Bros and Morgan Stanley. The bond holders will have to convert the bonds into equity during the public issue at a 15% discount to the issue price.
“The proceeds from the public issue will be used to augment the fleet by an additional 0.5mt,” he said. Mercator Singapore currently has a fleet with a capacity of five lakh tonnes. It will also borrow about $250 million to fund the fleet expansion programme.
The firm’s Singapore unit has recently started operating a chemical tanker division by hiring three chemical tankers for a five-year period. Mercator shares closed at Rs38.80 per share on the Bombay Stock Exchange, down 3.60%.