Some of the largest domestic shipowners boosted profits for the quarter ended 30 June by selling ships in what has been one of the worst three months for the industry in recent times.
The state-run Shipping Corp. of India Ltd (SCI), India’s largest shipping firm by fleet size and revenue, sold two ships for Rs24.28 crore during the quarter. Its profit fell 57% to Rs119.92 crore from Rs279.60 crore in the same period a year ago. The firm’s net profit would have been worse if not for the gain from selling a dry bulk carrier and an oil tanker.
Similarly, Great Eastern Shipping Co. Ltd, India’s biggest private ocean carrier, made Rs119.49 crore from the sale of three ships in the June quarter. The sale of these three ships—two dry bulk carriers and one tanker—shored up the firm’s net profit of Rs126.28 crore, down from Rs387.59 crore in the year-ago period.
Mercator Lines Ltd, the country’s second largest private shipping firm by fleet size, earned Rs42.04 crore from selling a ship to its Singapore subsidiary, almost 91% of its Rs46.01 crore profit for the quarter. “Whoever sees a good opportunity will sell,” said Nitin Kolhatkar, vice-president, finance, Mercator Lines. “Firms can make better utilization of that cash.”
A spokesperson for Great Eastern said: “We time ship sales only when the price is good not because of the quarterly numbers.”
While the sale of used ships is normal in global shipping, the industry has been badly hit by the ongoing downturn in the global economy and poor demand for trade which, in turn, has led to lack of demand for ships to move cargo.
For the first time, the June quarter also saw demand for oil tankers falling, instead of just dry bulk ships.
“Tanker rates plunged by as much as 60% during the first quarter, compared with the same period last year,” said U.C. Grover, a director for technical and offshore operations at SCI, which has oil tankers in addition to dry bulk carriers.
Mercator’s Kolhatkar said local firms owning single-bottomed oil tankers will have to phase out their ships by December 2010 to comply with a ruling of the International Maritime Organization, the global maritime regulator. Mercator converted one of its single-bottomed oil supertankers into a large ore carrier and sold it to its listed subsidiary in Singapore.
The next quarter is unlikely to be much better, though. “The worst is yet to come,” said Grover.
“The second quarter is going to be worse than the first quarter because the tanker rates continue to be bad. We are struggling to survive,” said the Great Eastern spokesperson.