Indian shipbuilders relatively free of order cancellations

Indian shipbuilders relatively free of order cancellations

Bangalore: Barring new entrant Pipavav Shipyard Ltd, India shipbuilders have been relatively free of the order cancellations and price renegotiations that global yards based in South Korea and China have been facing.

This could be because of the genuine and non-speculative nature of orders that have come to Indian shipbuilders as well as the type of ships that local yards are building, according to industry executives. India has some 23 yards that are building about 250 ships, together valued at close to Rs25,000 crore.

Most of these orders are for ships used to support offshore oil exploration and production activities and other niche vessels. The offshore sector has not been hit by the global downturn faced by dry bulk carriers and containers.

“India has not seen speculative order bookings, unlike other global shipbuilding nations," said Dhananjay Datar, chief financial officer at ABG Shipyard Ltd, India’s biggest shipbuilder outside of state control. “Indian yards have been carefully selecting clients from whom orders have to be taken."

ABG has orders for some 100 ships valued at about Rs12,000 crore. Datar said that ABG could face a potential order cancellation for three seismic data ships valued at about $49 million it is building for Norwegian seismic survey firm SCAN Geophysical AS, which has filed for bankruptcy. “Out of this, one ship is almost getting completed, for which we have received payment of about $12 million. Plus, we have about Rs22 crore worth of equipments supplied by the owner for constructing these ships," he added.

Bharati Shipyard Ltd, India’s second biggest private shipbuilder, said that it has not seen order cancellations or price renegotiations. “All our orders have been completely based on the need and requirements of our customers without any speculative element. This has made it possible for Bharati to survive the downturn," said a spokesman for Bharati Shipyard.

ABG’s Datar said that the bulk of the orders booked by Indian shipbuilders were done when ship prices were not at their peak. “If orders were booked when prices were at their peak, cancellations would have been higher," he said.

Pipavav Shipyard, which went public in September, however, has had a tough time. The firm said it faces order cancellations and price renegotiations on about 48% of its total order book valued at Rs4,459.6 crore.

Pipavav’s order book includes 34 ships, comprising 22 dry bulk carriers and 12 offshore oil exploration support vessels. Out of this, orders for 12 dry bulk ships worth Rs2,136.2 crore are either being renegotiated or are subject to arbitration, it said in a prospectus filed with the market regulator Securities and Exchange Board of India at the time of the share sale.

Great Eastern Shipping Co. Ltd, India’s biggest private ocean carrier, cancelled orders for three dry bulk cargo-carrying ships valued at about $125 million in the past 12 months. Two of these ships were ordered in China and one in South Korea, said a spokesperson for Great Eastern Shipping. “Cancellations are happening mainly in the dry bulk side. That’s where the bulk of the bloated global order book lies," the spokesperson for Great Eastern said.