Indian Shipping Industry: a Catalyst for Growth
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EXPORT-IMPORT BANK OF INDIA OCCASIONAL PAPER NO. 142 INDIAN SHIPPING INDUSTRY: A CATALYST FOR GROWTH Exim Bank’s Occasional Paper Series is an attempt to disseminate the findings of research studies carried out in the Bank. The results of research studies can interest exporters, policy makers, industrialists, export promotion agencies as well as researchers. However, views expressed do not necessarily reflect those of the Bank. While reasonable care has been taken to ensure authenticity of information and data, Exim Bank accepts no responsibility for authenticity, accuracy or completeness of such items. c Export-Import Bank of India October 2010 1 CONTENTS Page No. List of Tables 5 List of Exhibits 7 List of Box Items 7 Executive Summary 9 1. Introduction 25 2. Global Scenario 27 3. Indian Scenario 43 4. Indian Shipbuilding Industry 60 5. Role of Shipping in Mitigating Climate Change 67 6. Challenges and Strategies 73 Annexure 1. Indian Shipping: Top Ten Projects 93 2. The IMO Package for Reducing CO2 in Shipping Industry 94 3. Relevant Policies Currently Under Consideration at the 95 Marine Environment Protection Committee 4. Business Partners Involved in the Establishment 96 of a KG-Fund Project Team: Mr. S. Prahalathan, General Manager, Research and Planning Group Ms. Renuka Vijay, Manager, Research and Planning Group 3 List of Tables Table Title Page No 1. Chief Shipping Lanes in the World 26 2. Development of International Sea Borne Trade 27 3. World Sea Borne Trade in 2008, by Country Groups 28 and Types Of Cargo 4. World Fleet Size by Principal Types of Vessels 29 5. Top Six Countries with the Largest Controlled Fleets 30 (as of January 1, 2009) 6. Top 35 Flags of Registration with the Largest Registered 31 Deadweight Tonnage (as of 1 January 2009) 7. Nationality of Top 3 Major Open and International Registry 32 Fleets (as of 1 January, 2009) 8. Maritime Engagement of 25 Major Trading Nations 33 (2008 trade data) 9. Average LSCI Rankings of Country Groups, 2009 38 10. Existing and Emerging Drivers for Future Maritime 41 Transportation 11. Distribution of Indian Shipping Tonnage During 44 01.01.2009 to 31.10.2009 12. Share of Indian Shipping in India’s External Trade (2007-08) 45 13. Traffic Handled at Major Ports 46 14. Capacity Utilization at Major Ports 47 15. Cargo-wise Traffic Handled at Major Ports 2009-10 48 16. Development of Indian Shipping Tonnage 75 17. Progress of TRANSCHART 77 18. Capacity Utilization at Major Ports 78 19. Movement of Cargo by Major Transport Categories 80 20. List of Towns of Excellence 86 21. Comparison of Logistics Cost 87 5 List of Exhibits Exhibit Title Page No 1. World Fleet by Principal Types of Vessels 28 2. Baltic Dry Index and Freight Rates 34 (Nov 2007 – July 2010) 3. Growth of Indian Fleet 43 4. Composition of Indian Fleet 45 5. LNG Imports by India and World 49 6. World Shipbuilding Statistics 60 7. World Completions by Types of Vessels, 2008 61 8. Orderbook of Select Countries and the World 62 9. Indian Shipping: Orders Booked till 2011-12 63 10. Ship-Breaking Statistics for Select Countries, 2008 64 11. Trends in CO2 Emissions and Fuel Consumption by 68 Shipping Industry 12. Comparison of CO2 Emissions from Shipping and Other 68 sectors in the Total World Emissions 13. Comparison of CO2 Emissions Between Different Modes 69 of Transport 14. World’s Largest Emitters of CO2 from International 70 Marine Bunkers 15. Select Sectors Using KG Funds 82 16. Turnaround Time at Select Ports 88 List of Box Items Box Title Page No 1. World Bank’s Logistics Performance Index (LPI) 52 2. Shipping Trade Practices Bill 59 3. Basic Structure of KG Model 83 4. India’s Offer Under WTO’s Maritime Transport Services 91 7 EXECUTIVE summary The growth in international trade, of goods loaded (66.3%), while oil removal of trade barriers being the made up the balance. Growth in dry principal reason, has made the bulk trade is estimated at 4.8% with developing countries to concentrate the five major bulk products, fuelled more on the improvement of their mainly by the needs of China’s metal infrastructure, like roads, airports, industries. seaports, which play a vital role in the development of the economy. From a level of 2.5 billion tonnes Product storage, along with the in 1970, the volume of sea borne capacity to move large shipments, trade in the world has grown over have placed the shipping industry the years crossing 8 billion tons in in a very advantageous position. 2008, witnessing a CAGR of 3.3%. Containerization, multi-modal trans- Developing countries accounted for port services, advancement of marine greater share (60.5%) in total goods engineering technology, specialized loaded, as compared to the developed systems, and computerization countries, which hold a share of have contributed towards making 33.5% in 2008, and the balance being sea transport as a prime mode for accounted by economies in transition. movement of internationally traded Within the developing region, Asia goods. However, the development displayed a good performance having of shipping industry in a country also the highest share (62.3%) in the total depends on its population density, goods loaded, followed by Latin economic advancement and many America (22.9%). Following the global other inter-related conditions, like economic slowdown and sharp decline port and refueling capacities. in world merchandise trade, growth in international trade continued, albeit GLOBAL SCENARIO at the slower rate of 3.6% in 2008 over 2007, as compared to 4.5% in In 2008, international seaborne trade 2007 over 2006 (8168 million tonnes was estimated at over 8 billion tons of in 2008, 7882 million tonnes in 2007, goods loaded, a volume increase of and 7545 million tonnes in 2006). 3.6% over the volume recorded in the previous year. Dry cargo, including The level of world fleet also saw a rise bulk, break bulk, and containerized in 2009 with the world merchant fleet cargo, accounted for the largest share exceeding 1 billion dwt (dead weight 9 tonnage). The fleet of container- impacted given the economic ships increased by 11.9%, reflecting slowdown of 2008 and 2009. Since the growing share of traded goods the demand for ships / vessels is a being containerized; the tonnage of derived demand of commodities, the oil tankers increased by 2.5%; bulk slowdown affected the demand for carriers by 7%; general cargo ships ships / vessels during this period. This by 3.2%; in the year 2009 over the has been evident from the movement levels prevailed in the year 2008. of Baltic Dry Index (BDI), which is a daily weighted average of prices of Japan has been topping the list of shipping raw materials, and is one countries controlling fleets in terms of the leading indicators of global of dwt with 173.2 million dwt and economic activity. BDI measures 3720 ships; followed by Greece, with the demand to move raw materials, 3064 ships and 169.4 million dwt; and which indicates production, planning Germany, with 3522 ships and 104.9 and industrial activity worldwide. BDI million dwt. India was ranked at the reflects the freight cost to transport 15th position with 963 ships and 15.5 dry bulk cargoes around the world, million dwt, a share of 1.4% in terms mainly raw materials such as iron ore, of dwt. coal, and grains. The index excludes wet cargoes (such as crude oil carried In terms of value of trade, USA is the by tankers) and container business major country engaged in maritime (used mainly to carry manufactured transport generating 10.68% of world products). trade in 2008. Other major countries include Germany (8.22%), China Regulators Plan to Monitor (7.91%), and Japan (4.78%). Among Shipping Rates the Asian countries, China is the As the global trade shrunk by over largest trader with large container port 10%, many shipping lines found traffic and fleet. China International themselves in a situation of excess Marine Containers (CIMC) and capacity (many liners ordered new Singamas are the two largest ships during the economic boom container manufacturers, which make period). Some analysts predicted China dominate in this field also. that at least few shipping lines would India is placed at eighteenth position go out of business to match with the in the world (with a share of 1.45%), supply demand situation. However, it and seventh position amongst Asian is believed that shipping lines, in an countries. informal arrangement, collectively reduced the capacity through ‘slow Global Trends steaming’ (spending more days in sea, which helped them to save Effects of the Global Slowdown on fuel and reduce capacity). It is Shipping Industry has been widely estimated that slow-steaming could 10 cut a liner’s capacity by around the maritime transport sector of 5%. It is also believed that some contributing to global efforts at shipping lines have teamed up to reducing emissions of greenhouse levy a voluntary surcharge of US $ gases, IMO’s Marine Environment 400 per container. Both the Federal Protection Committee (MEPC) is Maritime Commission (USA) and the considering a number of mitigation European Monitoring Agency are measures aimed at reducing closely monitoring the developments emissions of greenhouse gases from to see any evidence of price fixing by international shipping. shipping liners. Integration of Shipping Industry Maritime Transport and Climate with Global Logistics and Supply Chains Change Challenge Global shipping majors, like other Like other economic sectors, maritime segments of the conventional transport transport, which by volume carries industry, are increasingly getting over 80% of global trade, has a role integrated with the emerging global to play in addressing formidable logistics and supply chain activities, challenge of climate change.