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Despite falling rates, SCI to buy more ships

Despite falling rates, SCI to buy more ships
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First Published: Wed, Jun 17 2009. 01 15 AM IST

Navigating the crisis: A file photo of Jawaharlal Nehru Port, India’s biggest container port. Analysts say SCI’s game plan is not clear as container shipping firms are paring capacity across the world
Navigating the crisis: A file photo of Jawaharlal Nehru Port, India’s biggest container port. Analysts say SCI’s game plan is not clear as container shipping firms are paring capacity across the world
Updated: Wed, Jun 17 2009. 11 23 AM IST
Mumbai: State-run carrier Shipping Corp. of India Ltd (SCI) plans to acquire more container ships and is looking to start new services to the US and the east coast of Africa.
The firm expects the buying process to be simpler now because the government last year granted it the navratna status, giving it greater autonomy in taking such decisions, said J.N. Das, SCI’s director for liner and passenger services.
Navratna, which means nine jewels, was originally given to nine public sector firms, allowing them greater operational and financial independence. The list of such firms has since expanded beyond nine, with more public sector entities being awarded the status.
Navigating the crisis: A file photo of Jawaharlal Nehru Port, India’s biggest container port. Analysts say SCI’s game plan is not clear as container shipping firms are paring capacity across the world to cut cost. Ashesh Shah / Mint
SCI’s move to expand comes in the face of a global economic and trade slowdown and a precipitous fall in freight rates, which have declined between 70% and 80% since August.
“The container freight rates are ruling low and we had incurred losses too. But the objective is to be present there in all markets so that we will be benefited when an upturn happens,” Das told Mint on Monday. “SCI is also developing a hub port concept by aggregating cargo containers in Jeddah port and redistributing it among Red Sea ports,” he said.
Under the hub port concept—which is similar to the hub-and-spoke model some airlines use—SCI will carry cargo from Europe to Jeddah port and these cargoes will be redistributed by ships going from India to connect Red Sea ports. These ships will carry cargo from Jeddah port to other Red Sea ports. “This will help us to integrate services without the need to go to all the ports ourselves,” Das said.
He added that SCI is in talks with various international container shipping companies for partnering the proposed services to the US and Africa.
“The game plan of SCI is not clear. Across the world, the container shipping companies are paring their capacity to cut down operational cost. SCI can minimize the cost by having partners in these services like in other trade lanes,” said an analyst who tracks shipping stocks, noting that all international container shipping companies are bleeding due to falling freight rates. He declined to be named because he is not authorized to speak to the media.
In an interim management statement, posted on its website on 12 May, AP Moller-Maersk A/S, the world’s largest container shipping company, said the global economic crisis has affected global trade negatively in 2009, with falling demand for container shipping.
“There is no immediate prospect of any improvement in the current market conditions. In view of this deterioration, approximately 10% of the global fleet has been taken out of service,” it said.
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First Published: Wed, Jun 17 2009. 01 15 AM IST
More Topics: Shipping Corp | US | Africa | East coast | Navratna |