While the global economic depression has led to the Baltic Dry Index collapsing and dry cargo ship owners scrapping ships as maintenance costs outweigh freight demand, liquid cargo shippers which have not been impacted substantially yet, are deferring their expansion plans. The Shipping Corporation of India (SCI), which has 80% of its business in the liquid cargo business, has decided not to place fresh orders for acquisition of vessels till March this year.
?We have decided not to place any new orders till the end of this financial year due to the ongoing economic meltdown. Since there is a possibility of the valuations coming down, we are waiting and watching the situation,? said SCI chairman and managing director S Hajara, in Kolkata.
Elaborating on the decision for holding up new acquisitions till March this year, an SCI official said, ?There is no price discovery mechanism today as the markets have not yet stabilised. We expect the prices to come down as the price of steel, a major component in shipbuilding has come down substantially. So we are likely to see a reduction of around 10% in shipbuilding cost.? Steel forms 20% to 21% of the input cost in shipbuilding.
However, the corporation has not curtailed orders already placed for the Eleventh Plan period that ends in 2012. ?SCI has till date placed orders for 32 ships at an investment of $1.6 billion. Also, it is looking at acquiring another 40 vessels at an investment of $2.5 billion by 2012.