The Hindu Business Line : Shipyards: Building on the boom

With global shipyards brimming with orders and unable to take any fresh ones, interest is building among Indian players to set up yards or expand existing facilities.

L&T bags a Rs 440-crore order for building four ships from Zadeko Ship Management CV of the Netherlands even before the company has a full-fledged shipbuilding yard in place. ABG Shipyard Ltd bags a repeat order for the construction of six anchor handling tugs for a total of Rs 270 crore from Sea Tanker's Management Co Ltd, taking its order-book to Rs 2,204.36 crore. These are but a couple of instances that mirror the boom that the shipbuilding sector is now experiencing.

According to an L&T official: "Our strong track record in hi-tech engineering and manufacturing, adequate area with a large water-front, established facilities for offshore structures and modules and the availability of necessary marine engineering resources helped us in getting this order. Other leading shipping companies across the globe are also in touch with us for their fleet augmentation requirements."

Yet, seen from another perspective, it becomes clear that ship-owners, the world over, are increasingly looking at India for their immediate requirement of ships. Moreover, global yards are today brimming with orders and are unable to take any fresh ones, which is further fuelling the boom in the domestic shipbuilding market. And this has heightened interest among local players to set up yards or expand their existing facilities.

Recent trends

As per recent trends, Gujarat appears to be the destination for new shipyards and indications are that the State may well become Asia's new shipbuilding hub. L&T's Hazira shipyard will focus on the construction of commercial vessels and warships for the Navy — it will have a capacity to construct hi-technology vessels with displacement of 20,000 tonnes. "The next phase would involve investment in a much larger shipyard to enable construction of larger vessels," the L&T official said.

ABG Shipyard has received 21.20 ha and 15 ha of land from Gujarat Maritime Board and Gujarat Industrial Development Corporation respectively for setting up a shipbuilding facility at Dahej.

The Kandla port, which has a Steel Floating Dry Dock (SFDD) that has so far undertaken repairs of 460 vessels, is shortly coming out with the final feasibility report on setting up a Rs 400-crore shipbuilding facility. A senior official of Kandla port said the proposed shipbuilding and ship-repair complex will have the capacity to build Very Large Crude Carriers (VLCCs) and other types of ships. "The shipyard will have a large back-up area, as well as a repair jetty of length sufficient to cater to the need of floating repairs — post dry-docking and post-launching works. We expect to have the successful bidder in place by the end of this year," according to the official.

In the vicinity, the Adani port has also put up on its drawing board a proposal to set up a Rs 1,000-crore shipyard at Mundra. Also, IL&FS and Nikhil Gandhi's Sea King Infrastructure are reported to have tied up with Singapore Government's Semb Corp for another Rs 4,500-crore shipyard project.

"Clearly, domestic players are certain that the boom in shipbuilding market is going to last for some more years. As long as Indian players are able to deliver new ships with cost and time benefits, the flow of orders will not dry," an industry analyst said.

Expanding order-book

In fact, reports indicate that new building prices have remained at historically high levels mainly due to speculation of strong future earnings, shortage of berth supply and rising steel prices.

With order-book continuing to expand by the week, shipyards the world over are inching towards completion of all deliveries by 2009.

Another factor that has impacted the tight situation in the shipbuilding market is the Common Structural Rules for tankers that took effect from April 1, 2006, which put pressure on asset prices.

The joint Tanker Project, under the auspices of Lloyd's Register, American Bureau of Shipping and Det Norske Veritas, has made concerted effort in standardising the structure for enhanced efficiency and increased safety by addressing key design parameters.

"This is expected to increase the overall requirement of steel per ship and thereby contribute to high ship prices. And this prompted many shipping companies to order for their vessels in early 2006," an industry analyst pointed out.

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