Cancellations hit Indian shipbuilders

India?s shipbuilding industry could suffer cancellations of about 15% of their total orders, worth at least Rs 3,750 crore, as the global economic crisis takes its toll on the sector, industry experts say. Orders for about 35 ships that were to be built in shipyards around the country face cancellation, compounding woes for a sector that is already facing a financing crunch as banks stop lending to the sector. “The current crisis would result in the cancellation of 25-30% of the orders across the globe. The Indian shipbuilding industry, which has orders for about 250 ships, will see up to 15% of the order book getting affected,” said a Mumbai-based shipping consultancy firm, i-maritime.

Indian shipyards will fare better than their global peers given that most of their orders relate to the construction of offshore vessels where cancellations are comparatively less. The bulk of the cancellations are for dry bulk carriers. Shipyards most likely to be affected are new entrants which set up shop in anticipation of a boom in orders amid a global shortage of shipbuilding capacity and delivery periods that stretched as much as four years. At least 10-15 greenfield shipyards were planned by companies like Bharti, ABG and Modest Infrastructure but, with the slowdown in the industry, companies are now rethinking their plans.

“Many speculative companies got attracted to the profits in shipping business and ordered vessels. These companies are no longer interested in the business,” Shipping Corporation of India chairman and managing director S Hajara said. To add to their woes, banks have stopped extending loans to Indian shipbuilders. “Due to recession, shipping companies are finding it difficult to survive. They have started cancelling orders, severely affecting the shipbuilding industry. The banks are extending loans only to creditworthy clients,” said Oriental Bank of Commerce executive director H C Sinha.