Gesco's optimism

THE GLOBAL short-term outlook for dry bulk shipping is extremely positive.

With optimism about the Indian economy in the coming year, the no slackness is foreseen in the domestic dry bulk trade. A certain proportion of the fleet in Indian waters would be maintained to service this business. On the international front, tanker rates are expected to be firm across all categories.

With increasing Indian refining capacity, the requirement of product tankers for Indian product imports is expected to decline. Pipelines, proposed and commissioned, further limit the product tankers utility for Indian coastal trade. This scenario represents a risk to the earnings of the vessels currently involved in this trade, though a restructured portfolio and increased international trading could limit this downside.

Crude carrier rates, which flared at the fag end of the last quarter, are expected to stay firm in the coming year with OPEC expected to maintain the current increased production. The company is exploring the possibility of crude carrier investment to support its strategic thinking, with due consideration given to the attractive returns on investments in this sector.

On the domestic front, increased Indian refining capacity and pipelines would continue to adversely impact product tanker demand but would also lead to a concurrent increase in Indian crude oil imports. Oil companies would have the option of selecting between Indian and foreign-flagged vessels and the possibility of increasing crude imports by foreign bottoms is exists.

With India's LNG requirement expected to double in the next five years, LNG shipping represents opportunity, as this increase would be almost exclusively met by imports. We are exploring investment possibilities in this area, which would be much clearer once the Indian Government's policy for LNG shipment is in place. This business area is at a nascent stage and any investments would possibly be made over the next two-three years while revenues would crystallise only by 2003-04.

The 2000-01 first quarter has seen a marked improvement in earnings for most segments and consequent healthy operational performance. The management continues to maintain its philosophy of investing and divesting, within the overall strategic framework, to take advantage of movement in asset values which are seen to be diverging from fundamental long-term earnings potential.

(Edited-extracts from the annual report of Great Eastern Shipping.)