Friday, 27 February 2009

Industry Snapshots

Maritime pollution should be a criminal offence, says Europe. Members of the Transport committee of the European Parliament voted on February 17 recommending that serious maritime pollution cases should be made a criminal offence. Minor cases could be treated as ‘administrative infringements’, although even these should be made criminal if they are repeated, deliberate or caused by serious negligence. Criminal penalties could be decided by State administrations. The proposals before the Committee, called the Erika III plan, call for action against owners and classification societies as well. Seafarer organisations are watching these developments with apprehension bordering on dismay. Some members say that these actions are essential for preventing environmental disasters, pointing out that many ship owners prefer to pay a fine rather than tighten up on pollution. Experts say that the February 17 vote has cleared the decks for the European Parliament which will negotiate with its members and vote in March, and that the recent massive oil pollution off the Irish coast by a Russian naval tanker refuelling in the region will probably catalyse regulations. There is also talk of strengthening EMSA, the watchdog European Maritime Safety Agency.

Mahindra & Mahindra to enter leisure boating segment, and will manufacture powerboats, cabin cruisers and catamarans, reports the Economic Times. A joint venture with Mumbai based marina operator Ocean Blue, the new entity will be called Mahindra Ocean Blue. It will import US Evinrude engines and manufacture boats in the 20 to 40 feet segment under the brand name ‘Mahindra Odyssea’. The company will eventually manufacture its own marine engines. The Vice President of M&M, Zhooben Bhiwandiwala, told reporters “A dedicated facility would be set up, depending on the demand”. This is the first time a major industrial group has entered the leisure boating industry in India. The company will target corporate and high net worth individuals in Mumbai, Goa and Cochin, as well as the defence forces. “We hope to sell around 200 to 300 units in the next 2 to 3 years,” said Mr Bhiwandiwala. Anand Mahindra, the MD of the Mahindra Group, said that this move would help develop Indian waterways.

World tonnage touches 1.12 billion deadweight, according to the United Nations Conference on Trade and Development (UNCTAD).The last two years have seen a huge increase in the global merchant fleet, the UN says, pointing out that there was a gain of 82 million DWT on a YOY basis. The UK based Guardian quotes the UNCTAD review of Maritime transport, saying that the dry bulk sector witnessed particular growth, although vessel orders in general were at their highest levels ever, “reaching 10,053 ships with a total tonnage of 495 million dwt, including 222 million dwt of dry bulk carriers”. The tonnage of dry bulk ships on order at the end of 2007 was 72 times higher than it was in 2002. One result of this phenomenal increase has been a decrease in the average age of a ship, now at just below twelve years. Ship sizes, too, continue to increase. The average container ship size grew to 2516TEUS instead of 2417TEUS between Jan2007 and Jan 2008. Developed countries have the youngest vessels with an average age of ten years, and an increasing number of containerships have replaced general cargo vessels.

Shipping Ministry moots setting up Rs 10000 crore fund to finance buying of ships. The move comes as owners struggle to secure funding from banks and the external commercial borrowing option becomes increasingly difficult. The industry also wants the Government of India to encourage banks to make finance available for buying ships. In the present climate, many shipping companies have postponed plans for ship purchase, although SCI said recently that it has plans to buy 29 ships soon with another 40 in the pipeline. With about a eighth of the money payable upfront, the fund will undoubtedly give a boost to debt financing, which accounts for three quarters of payment on an average. Foreign banks have become increasingly shy of lending money to Indian companies, or are in no position to take on additional liabilities on their books. The proposal is reported to be with the Ministry of Finance awaiting clearance.

Fairplay Research warns of poor prospects for the oil industry in 2009, saying that newbuildings continue to enter the market at a time when demand is drying up. The oil tanker fleet stood at 358 million DWT at the end of last year, and is still growing at more than 6 percent annually, with the chemical tanker segment growing at around 10 percent. Although the use of tankers for storage may soften the landing a bit, Consultant Niklas Bengtsson said that “Research analysis confirms that the tanker sector, like the world shipping industry as a whole, faces a year of overcapacity, weak demand, falling production and low freight rates. It won’t get better in the short term.”


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