Week ending February 11, 2003

News on Shipping

Shipping freight to Europe to go up by 33-35 per cent: Container freight rates from India to Western Europe are set to increase by 33 to 35 per cent from March 1. The Karmahom Conference, which operates container shipping lines in this sector, has stated that rates will increase by $250 per twenty feet equivalent unit (TEU) containers and $ 500 per FEU (forty feet equivalent unit containers). Shippers will now pay about $ 950 per TEU and about $ 2,000 per FEU. Shipping Corporation of India (SCI) is a leading member of the Karmahom Conference, whose other members include CMA-CGM, Contship Container Lines, Ellermanh, Evergreen Marine Corporation, Hapag Lloyd, K-Line, Malaysia International Shipping Company, Norasia, Maersk Sealand, P&O Nedlloyd, Rickmers Line, Safmarine, United Arab Shipping Company and Yang Ming Line. The new rates are applicable for cargo to and from Mumbai and Kandla to UK/North Continent, Scandinavian and Mediterranean ports. The conference has termed the freight hike as a "rate restoration" exercise. Freight rates in this sector have been stagnant in the last few months owing to the recession and excessive shipping capacity.

SCI to invite bidders for fourth round of due diligence: SBI Lazard, the advisers to SCI disinvestments have reportedly written letters to bidders for the strategic stake in SCI inviting them for another round of due diligence between February 10-13. All the bidders with the exception of BPL are understood to have sought time slots to conduct due diligence. GE Shipping, which had earlier decided against pursuing the acquisition of SCI for the time being due to continuing uncertainty in the timing of the sale, has also sought time slot for conducting the due diligence. The bidders in the race for the strategic stake in SCI include Essar Shipping, Videocon and Sterlite. The proposed due diligence is the fourth one to be undertaken by the bidders. The first round of due diligence was completed prior to June 2002. Delay in the disinvestments process, coupled with the loss registered by SCI in the first quarter prompted potential bidders to ask for second round of due diligence. After SCI's bottom lines showed improvement in the second quarter, with the refund of tax, the third round of due diligence was conducted. The latest round of due diligence follows the announcement of third quarter results of SCI.

SCI plans to pay interim dividend: Shipping Corporation of India (SCI) is considering paying interim dividend to the Government, if the company is privatised before March 31. The Shipping Ministry and the management of SCI have reportedly started consultations on the payment of an interim dividend in the region of 40-50 per cent about Rs 150-200 crore. The interim dividend will mainly be paid out of the reserves of SCI worth over Rs 500 crore. A formal proposal to pay interim dividend will be considered shortly by the board of SCI. The dividend payment would reinforce the strong fundamentals of the company and improve the valuation for the government's 51 per cent stake being put up for sale. The Government currently holds 80.12 per cent shares in SCI, while the remaining 19.88 per cent stake is with FIIs, mutual funds, insurance companies and retail investors. The government is in the final stages of privatising SCI by selling 51 per cent of its stake in the company to a strategic partner.

Contship plans loop services to Asia: Contship Containerlines, part of the CP Ships Group, has reportedly proposed to shippers from Australia and New Zealand, three new loops for covering various markets in Asia, including India, through slot charter agreements. The loop will be from Australia/New Zealand to India, loop to South East Asia and the loop three to East Asia/China. The Australian shippers will be offered sailings from Brisbane, Sydney, Melbourne, Adelaide and Freemantle. From New Zealand, the company currently provides services on other strings from Auckland, Wellington, Tauranga, Nelson and Timaru. Under the proposed plan, there will be direct calls to Mumbai and NSICT. India is now among Australia's top 10 trading partners.

NSB chief calls for level playing field for shipping: Mr. V.K. Khanna, chairman of the National Shipping Board (NSB), an advisory body constituted under the union ministry of shipping, has called upon the government to work out a legislative framework for the holistic development of the shipping sector. Mr. Khanna, who presided at the 103rd meeting of the National Shipping Board (NSB) said that while the policy emphasis has so far been on the enhancement of Indian shipping tonnage, the thrust of government policy for the future needs to be on `level playing field', which would make the Indian shipping industry globally competitive. Among key issues discussed at the NSB meeting included development of coastal shipping, problems due to antiquated customs procedures, inadequate infrastructure and road and rail linkages and development of ship repair industry.

News on Ports

Trial crude handling at Sandheads in mid-March: The Shipping Corporation of India (SCI), Indian Oil Corporation (IOC) and Kolkata Port Trust (KoPT) are jointly planning to start tandem mooring operations for handling of crude at the Sandheads. The cargo operation, the first of its kind, is expected to go through a trial run in mid-March. If the trial proves successful, crude transshipment at the Sandheads will be possible for nearly 10 months in a year against 5-6 months as of now. IOC has been keen on tandem mooring operations, as no major fresh capital investment is required on its part. The current lighterage operation at the Sandheads involves ship-to-ship discharge of crude from a mother tanker to smaller daughter tankers. The lighterage operations at Sandheads started in October 2002 and are expected to continue till March 2003. So far, more than two million tonnes of crude oil have been handled and is expected to touch three million tonnes till operations are shut in March when seas turn rough.. With proposed tandem mooring operations, ship-to-ship discharge will be possible even when the sea is moderately rough, except in monsoon months between July and August. The average draught available at Sandheads is more than 50 metres, which can support VLCCs and ULCCs, coming with full load to discharge into smaller daughter vessels for second round of discharge at Haldia, Chennai and other east coast ports.

News on Logistics

Advance manifest for US-bound exports worry freight agents: With the 24-hour advance manifest regulation for shipping goods into the US coming into force from February 2, shippers and cargo fraternity is worried of impending procedural complications. Compliance with the 24-hour rule is mandatory under the new US Customs laws and requires a detailed cargo manifest to be filed. The change in the documentation procedure is expected to take not only long time but also increase the transaction cost. The advance manifest to be submitted has 18 descriptions, including booking number assigned by the ocean carrier, shipper (exporter's name and address), consignee's name and address, name of ocean carrier, vessel name/voyage number, place of receipt, port of loading and discharge, place of delivery with State code, container number, seal number, cargo marks and numbers and full commodity description. Under the new regulations, instead of just one-line description of the complete list of goods along with the "said to contain" tag, the shippers have to provide the entire description of the consignment, including the eight-digit Indian Customs Classification code based on the eight-digit Harmonised System of Nomenclature (HSN).

Railway ministry plans extension of rail link to Vallarpadam: The Union Railway Ministry is considering a proposal to extend the railway line from the Ernakulam Old Railway Station to Vallarpadam Island, the site for the proposed container transshipment terminal of the Kochi port. According to Mr. V. Anand, general manager, Southern Railway, there was no technical problem in extending a 3 km line, including construction of a bridge across the backwaters. However, the railway was yet to get a firm request from the Ministry of Shipping in this regard. Currently, the railway officials are holding discussions with the port authorities on the possibility of extending a railway line.