Mumbai: Indian shipping firms are counting on rising commodity demand and buoyant export-import trade in the country to tide over a slowdown in the global economy and domestic inflationary pressures, key players said.
“As far as India is concerned, the commodity trade is expected to rise. It sees a 15-20% growth here. So, demand for ships will continue to be strong,” Yudhishthir Khatau, director of Indian National Shipowners Association, said.
INSA has Oil and Natural Gas Corporation Ltd, Shipping Corporation of India, Dredging Corporation of India, Essar Shipping Ports & Logistics Ltd and Mercator Lines Ltd among its members.
In FY08, Indian ports, which usually run at more than 90% capacity, handled 519 million tonnes of cargo, an increase of over 12% from last year, a recent report by Ernst & Young showed.
“To overcome capacity constraints, the National Maritime Development Programme has estimated capacity enhancements in ports,” the report said.
India imports edible oil and pulses in large quantities. Besides, crude oil, coal, minerals form bulk of imports. It exports rice, sugar, iron ore, chrome and even finished steel in significant amounts.
Heavy imports of crude oil and coal by several private and public sector players, who are either expanding current capacities or setting up new units, will further help the industry, an official with Garware Offshore said.
New business models, where manufacturers work and operate from different locations across the globe to cut transaction costs, have also given an impetus to the logistics industry, S.S.Kulkarni, secretary general of INSA, said.
“Cargo movement is bound to increase in the days to come as the business modules have changed... they are no longer single-location manufacturing centres,” he said
“So, we have raw material facilities in one location, assembling in another and then delivery,” he added.
Shipping firms said costs of ships have risen due to higher prices of steel, a key raw material, which has risen by a third in 2008.
“But higher freight rates in most sectors is offsetting the rising ship cost,” Khatau, who is also managing director of Varun Shipping Ltd <VRNS.BO>, said.
A slowdown in the U.S. economy, which could hit the global trade, is likely to affect the industry in the long-run but policy-makers were hopeful the market would recover by 2009.
“If the US recession becomes a global recession then shipping will take a beating. But till now it looks fine. Demand is strong and money is still changing hands,” Divyanshu Tambe of I-Maritime Consultancy said.