Choppy waters

New Delhi, July 20: Shipping companies may not be able to press home the advantage of the new tonnage tax to expand their fleets as prices of second-hand ships have skyrocketed and international ship-building yards are not taking any orders for new vessels because their order-books are full.

There has been a huge leap in sea freight rates and shipping companies worldwide have gone in for massive expansion plans to rake in extra profits. According to shipping industry experts, the earnings of a very large crude carrier (VLCC), which ranged from $10,000 to $15,000 per day last year have shot up to $70,000 to $80,000 per day.

This sharp increase in earnings has led to a surge in the demand for ships. As a result, the prices of second-hand ships have more than doubled. A 10-year old double-bottomed VLCC that carried a price tag of $20 million last year now costs around $45 million.

The prices of new ships have also shot up. The price of a new Aframax tanker, which earlier hovered around $65 million, has now gone up to $100 million.

Leading Japanese, South Korean and Chinese ship-building yards such as Mitsubishi, Mitsui, Hyundai, Daewoo, China Ship and Dalian are not taking any more orders as their capacities are fully booked till 2007.

In fact, the Clipper group of Denmark was forced to place its order for four ships with India’s Cochin Shipyard as there were no takers for its order among the leading companies. The ships are expected to be delivered in 2005-06.

However, the positive aspect is that the domestic shipping companies had expanded their fleets in the last financial year as there were strong indications from the government that the tonnage tax was coming through. Shipping ministry sources disclose that the gross tonnage of Indian shipping has gone up to 7.41 million on June 30 from 6.2 million in April 2003.

Shipping Corporation of India (SCI) has added two new Suezmax tankers to its fleet, Great Eastern Shipping Company has acquired three used Aframax tankers, while Essar has bought two second-hand VLCCs.