Bangalore: Despite declining global trade, state-run Shipping Corp. of India Ltd (SCI) has hired two medium-sized container ships for two years, taking advantage of rock-bottom ship rentals.
India’s biggest shipping firm and only ocean carrier that runs container services for overseas trade, hired one ship at a day rate of $5,700 (Rs2.7 lakh) and the other at $6,150.
The first vessel has a capacity to carry up to 3,534 standard containers, and the second, up to 3,300 containers. A year ago, ships of this size would have been able to earn at least $30,000 a day for its owners.
SCI has the option of extending the hiring period by a year at a higher rate.
“It’s part of a long-term strategy,” said J.N. Das, the firm’s director looking after the container business. “Just because the market is down doesn’t mean that we should stop operating container ships altogether.”
SCI runs a fleet of nine container ships, some of which it owns. Shipping firms typically hire vessels even if they have their own fleet so they can run additional services.
The two ships hired by SCI in early May will be used to carry containers between India and Europe, a service the firm was running along with four partners till April. Zim Integrated Shipping Services (I) Pvt. Ltd, MISC Bhd, K-Line and Yang Ming Marine Transport Corp. have since withdrawn from the India-subcontinent-Europe (ISE) service on falling demand and lower freight.
SCI is now running the fixed-day, weekly direct service in partnership with Mediterranean Shipping Co. SA, the world’s second biggest container shipping firm. The ISE service links Jawaharlal Nehru Port, India’s busiest container port, and the nearby Mundra port in Gujarat with European ports such as Barcelona, Hamburg and Rotterdam.
“We are not looking to make profits. We are trying to cut down losses,” Das said about the decision to hire two ships amid falling demand and freight rates. SCI has incurred losses in its container ships business for two years, with no respite in sight as freight rates have collapsed to record lows. It now costs $350-400 to ship a loaded standard container to Europe, down almost 70% from a year ago, when the rate was about $1,200. The current rates don’t even cover operating expenses for the owners.
SCI, however, is positive about the sector and getting ready for when the market rebounds. “In the long term, there is potential in this business. More and more goods are being shipped in containers,” said B.K. Mandal, the firm’s finance director. Containerized cargo represents only about 55% of India’s external trade by volume, lower than the global average of 80-85%.
SCI says it cannot afford to remain out of the container shipping trade. “Being the only Indian mainline container ship operator, the country’s external trade demands we remain there,” Mandal said. “Otherwise, international ship operators will hold our exim (export-import) trade to ransom.”
SCI is starting a new service to East Africa and looking to re-enter the US sector, which it dropped in January 2008 after partners pulled out because it had become unviable. it has not found new partners yet for the same reason, Das said.