Dry Bulk trade comes
out of the gloom
Dry bulk trade is on the way up
with 2013 having seen the second highest contracting trend after
2010. The outlook for the near future looks
promising considering various factors including that the Chinese have put in
place a stimulus plans, the increase in the US grain production, coal based
electricity generation in Japan and the reports of the European Economic
recovery. Deliberations on these encouraging features and other
issues took center stage at the “1st Annual Conference on the Outlook for
India's Seaborne Dry Bulk Trade” organized by Hinode Events and Services Pvt
Ltd., in association with The Shipping Tribune on 23rd January 2014 at Hotel
Vivanta by Taj-President, Mumbai.
China which is responsible for the production of nearly
one-half of the worlds finished steel played a pivotal role in India’s seaborne
iron ore shipments until the Indian Supreme Court’s (SC) decision banning
unbridled mining that was underway informed Jai Galada, Sr Chartering Manager,
SIVA Bulk in his evaluation of “The Worldwide Dry Bulk
Trade and India’s place in it”. He explained that when it comes to the trade in
coal, China, USA and Japan feature prominently in the push - pull
dynamics. According to him coal mining will increase from the 120 mi
tons to over 200 mi tons soon. “The SC has given permission to some mines to
operate,” he said. “Besides about & 500 million to $ 600 million has come
into private equity indicating another channel of funding has come in which is
likely to boost up India’s trade. But the bigger question is whether Indian
ports will be able to meet the demand. The good news is that private ports are
coming up and many are on the road to expansion.
Focusing on the “Outlook for India's Grains Trade and 3
Critical Issues for Vessels loading Grains out of India" by Mr Neeraj Mishra,
Director, Canopus Shipping & Trading Pvt Ltd., stated that much of the
excess grain produced are put into the tender by the Food Corporation of India
(FCI) or traded. Export of wheat was placed at 5.5 mi tons and rice at 10 mi
tons. Maize was 4.8 mi tons and SBM 1.75 mi. On the other hand 2.1 mi tons of
pulses and 1.55 mi peas got imported last year. Prices offered in the
international markets are better. But many of the Indian ports lack facilities
to handle dry bulk cargo and the documentation and other procedures are time
consuming.
It is well-known fact that
India’s expenditure on logistics activities is one of the highest in the world
equivalent to 13 per cent of GDP, higher than that of developed countries like
US (9.9%), Europe (10%) and Japan (11.4%). This is due to combination of many
factors like Government’s policies, industry fragmentation and infrastructure
facilities. Citing this factor Abhijit Chaudhury, GM-Shipping of JSW
Steel Ltd., dwelt on "The Outlook for India's Iron Ore Trade and Coastal
Shipping Movements" saying, “The competitiveness of an export oriented sector is
adversely effected by inefficiencies in the logistics cost due to inadequate
infrastructure facilities. One such case is that of iron ore, the primary raw
material for iron and steel industry that depends on an efficient railway system
and port facilities for exports. The issue was also of critical importance as
the logistics cost is more than that of mining/processing cost. Attractiveness
of India as an investment destination emerges largely from the fact that India
has large reserves of Iron ore with high iron content, the basic raw material
required for steel production.”
India is currently the fourth largest producer of crude
steel after China, Japan & US. All major players like SAIL, Tata Steel, JSW
Steel are ramping up their production capacities which will automatically boost
the demand of Iron Ore. By 2020 India hopes to achieve steel production of 200
Million tones thereby surpassing Japan & US and only trail behind
China.
Various drivers play an important role in boosting the
dry bulk trade. The abundance of raw materials, iron ore and cheap workforce
makes Indian steel industry competitive. However dependence on imported coking
coal, low production efficiency, inadequate infrastructure & technology and
delays in regulatory clearances & approvals are major hindrance to growth of
Indian Steel Industry.
Steel industry is heavily dependent on raw material and
bulk movement. For every ton of steel produced about three tons of raw materials
requires to be transported. Indian steel industry is facing difficulties and
delays caused due to inadequate infrastructure for transportation and handling
bulk materials. Most of the steel plant does not have proper connectivity
through rail network to mines and ports. Bulk handling facility at majority of
the ports, mines and steel plants are of low capacity causing delays in loading
& unloading. In most cases road networks connecting steel plants to mines
and ports are congested leading to delays in supply and delivery of raw material
and other items.
Getting into the intricacies of “The Documentation
hurdles faced by Importers and Exporters” by Hanoz Mistri, Director, Five Stars
Chartering Pvt Ltd advised the delegates about some pragmatic approaches which
the trade could avail of. He explained in details the various procedures and
documents that are necessary.
Two legal experts were at hand to give advice on how to
avert malpractices that are rampant and what the trade should do to avoid
becoming victims. They were Dharmendra Nair, Partner, Squire Sanders (UK) LLP
who spoke about “The Carriage of Iron Ore Fines and the Legal Dangers and Ashwin
Shanker, Advocate & Arbitrator, LLM (Maritime Law) London, The Chambers of
George A. Rebello, who gave details about the Implications of Liquefaction, Who
and What Owners can do when their freight is still unpaid?” and…“How Charterers
can get away without paying freight? ”
In this scenario, the world is in
a strong growth period and shipping industry experience resembles the boom
periods of the past. All in all, there will be a sharp growth in the bulker
fleet. The dry bulk fleet is expected to grow by less than 5% per year up to
2020. Vessel values and earnings will continue to be under pressure for years to
come as a result of the current oversupply.
Source: Maritime Professional