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Shipping Corp plans to sell 13 ships for breaking by March

Shipping Corp plans to sell 13 ships for breaking by March

Bangalore: The country’s biggest ocean carrier, the state-run Shipping Corp. of India Ltd, plans to sell up to 13 ageing vessels for breaking by March as it looks to shore up performance.

“Our plan is to sell 15–17 ships this fiscal, out of which we have sold four ships so far," said Arun Kumar Gupta, a director at Shipping Corp.’s technical and offshore division. On average, these ships are 25 years old.

SCI runs a fleet of 82 ships, including bulk carriers, oil tankers and product and chemical carriers. It has another 26 ships under construction at various Indian and overseas yards.

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As a result, charterers (those hiring ships) are showing less preference for ships built 20-25 years ago.

Ship-breakers globally have chopped up ships with a combined cargo-carrying capacity of 33 million dead weight tonnes, or dwt, since January, a 64% increase over the same period last year, according to London-based Clarkson Research Services, a unit of Clarkson Plc., the world’s largest ship broker.

In terms of numbers, 786 ships have been demolished globally so far this year, compared with 732 in the same year-ago period.

The main driver behind the rise is a near threefold surge in dry tonnage (capacity) sold for scrap, which has risen 290% to 19.6 million dwt this year, Clarkson Research said.

“It is not viable to operate 25-year-old ships because charterers do not want vintage vessels," Gupta said. “We have to spend more on repairs and maintenance of older ships. Besides, the acceptability of such ships at ports is less. When freight rates are under pressure, there is no point running older ships and keep sustaining losses."

Shipping Corp. reported a loss of 146.46 crore for the first half of this fiscal year, compared with a net profit of 450.46 crore a year earlier.

It earned 32.41 crore from the sale of two of the four ageing ships in the first half, compared with 143.49 crore from the sale of six ships a year earlier. The other two ships were sold in October and the sales will be recorded in the third-quarter results.

Much of the losses ( 140.6 crore) came in the second quarter when the firm sold just one ship for scrapping, earning 20.13 crore, compared with 128 crore earned in the year-earlier second quarter from the sale of five ships.

In the year to March 2011, Shipping Corp. earned 200.98 crore from the sale of eight ships for dismantling.

Shipping Corp.’s finance director B.K. Mandal explained that the main contributors for the second quarter loss, apart from depressed freight rates, were lower income from the sale of ships, higher depreciation and ship fuel costs, and an increase in the interest cost due to the revaluation of foreign currency loans.

“In a dire market, (both dry bulk and tanker) owners may opt to scrap even younger vessels due to weak freight markets," said Erik Stavseth, a shipping analyst at Oslo-based investment bank Arctic Securities ASA. Stavseth said there are three ways to restore the supply-demand balance and help return the shipping industry to profitability. These include scrapping vessels, laying up ships and refraining from ordering new ships.

Shipping Corp. has lost more than half of its value on BSE this year, while the Sensex has shed about 20%.

On Thursday, Shipping Corp.’s shares fell 1.5% to 61.45 on BSE and the benchmark index dropped 1.9% to 16,461.71 points.