Home >companies >Shipping Corporation in talks with Korea’s STX for shipbuilding JV

Mumbai: State-run Shipping Corp. of India Ltd (SCI), the county’s biggest shipping firm by fleet size and revenues, is in talks with South Korean shipbuilder STX Shipbuilding Co. Ltd for a joint venture even as India looks to scale up its shipbuilding capacity to tap into a global shipbuilding boom.

“SCI has started discussions with STX for a joint venture shipyard in India, but nothing has been finalized as yet," said a person familiar with the development, who did not wish to be named. The person declined to provide more details.

S. Hajara, chairman and managing director of SCI, said the company is “talking to many partners and will finalize one at an appropriate time." He did not confirm talks with STX and declined to name the potential partners. An STX spokesperson, too, declined to comment on the subject.

Capacity boost: The STX headquarters in Seoul. The company has filed an expression of interest to develop, construct, operate and manage the proposed mega shipyards on India’s eastern and western coasts.

Indian shipyards currently have the capacity to build ships with a combined cargo carrying capacity of 2.8 million tonnes (mt) a year. This is small by global standards. India has 23 shipyards, seven of which are owned by the Centre and two by state governments. The other shipyards are owned by private firms, including ABG Shipyard Ltd, Bharati Shipyard Ltd, Larsen and Toubro Ltd and Pipavav Shipyard Ltd.

Global shipbuilding capacity is projected to peak at 50mt a year in 2010 before levelling off in the 40-45mt region over the following five years. India’s capacity is projected to double to 4mt by 2012 and rise further to 19mt by 2017, according to audit and consulting firm KPMG India Pvt. Ltd.

STX, the world’s fifth biggest shipbuilder by orders, has filed a so-called expression of interest to develop, construct, operate and manage the proposed mega shipyards on India’s eastern and western coasts. The exact locations of the two yards are yet to be decided.

The two shipyards proposed by the government will have a capacity to build and repair ships, initially, of up to 175,000 dead weight tonnes (a measure of the cargo carrying capacity). The yards can be expanded further to construct ships of up to 300,000 tonnes, which may be container ships, liquefied natural gas carriers, very large crude carriers and large dry bulk cargo ships. The yards will also be able to repair and refit about 70-80 ships of different types in a year.

Mumbai Port and Ennore Port Ltd have been appointed nodal agencies to process the tender on behalf of the shipping ministry for the west and east coast shipyards, respectively.

STX Shipbuilding has facilities in Busan and Jinhae in South Korea, Dalian in China and is also building a new yard in Vietnam.

SCI had earlier said it was exploring the possibility of entering the shipbuilding business by teaming up with a foreign firm. “Entering shipbuilding is a backward integration of our existing business of owning and operating ships," said Umesh C. Grover, the Mumbai-based firm’s director looking after its technical and offshore business. Globally, many shipping companies, including the world’s biggest container shipping firm Maersk Line, either hold stakes in shipyards or control shipbuilding facilities. “Shipbuilding business provide value addition to our existing business," Grover said.

STX also has a majority-owned ship-owning firm STX Pan Ocean Co. Ltd that runs a fleet of 59 ships. Last year, STX bought a 39.2% stake in Norwegian shipbuilder Aker Yards, which specializes in building cruise, ferry, offshore and other niche vessels, for $800 million.

SCI had earlier said it would invest around $3 billion in the next three-five years to buy ships for replacing its ageing fleet. It has placed orders with Korean yards such as Hyundai Heavy Industries Co. Ltd, Daewoo Shipbuilding and Marine Engineering Co. Ltd, STX Shipbuilding and China’s Jinling Shipyard for building 28 ships, which are estimated worth $1.3 billion.

Out of this, STX is building six petroleum product tankers, each having a capacity to load 73,000 tonnes of cargo and six dry bulk cargo ships, each having a capacity to transport 57,000 tonnes of dry bulk commodities.

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