Tata to look at shipbuilding

The Tata group is looking at the possibility of entering the shipbuilding business as India looks set to boost its shipbuilding capabilities to meet growing global demand for cargo ships. The Tata group has shown interest in building a shipyard near Shivrajpur in Gujarat after the state government invited expressions of interest from private firms, according to a senior Gujarat government official.

The group, which makes everything from salt to cars, is conducting a feasibility study on the project, said people familiar with the matter who did not wish to be identified. Tata Steel makes steel, a key input for constructing ships. In December 2006, the company signed an agreement to set up a 50:50 joint venture with Japanese transportation giant NYK Line to set up a shipping company.

Shipbuilding requires steel plates having a width of 2.5 metres and above; the use of these reduces the number of plates that have to be pieced together to build a ship???s hull. Though local steel makers such as the state-owned Steel Authority of India Ltd (SAIL) and Essar Steel make shipbuilding grade steel, the plates they make are less than two metres wide. As a result, a company building a very large crude carrier that has a height of 30 metres from the keel to deck needs to weld more steel plates together. Because of this, Indian yards source most of their steel from steel-mills in Ukraine, China and Korea.

In comparison, shipbuilding grade steel made in Korea has a width of four metres. Responding to the opportunity for building steel plates with larger width, steel makers such as Essar Steel and Tata Steel are planning to put up plate rolling mills that can make steel plates having a width of more than 2.5 metres.

Typically, for making 10-15 ships in a year, a yard would require close to 70,000 tonnes of steel, and steel makers such as Tata Steel, Essar Steel and Jindal Steel are now eyeing the shipbuilding business because the steel they make can also be utilized for constructing ships at their own yards.

If the Tata group decides to enter shipbuilding, NYK, and even the joint venture between Tatas??? and NYK, will be able to build and repair ships at the yard which would be a huge business potential in itself. According to local reports, the Gujarat government plans to develop 10 clusters consisting of 100 yards with private investments worth $12.7 billion. With capacities in traditional shipbuilding nations such as Japan, South Korea, and Europe booked for the next few years, global fleet owners have started looking at new destinations such as China, India and Vietnam to build their ships.

Steel maker JSW is also planning to set up a shipbuilding facility, either in Gujarat or in Maharashtra, to meet its own requirements for shipping and is planning to build small and medium-sized bulk carriers.