Indian shipowners cut expansion plans

Reuters reported that Indian shippers are cutting their acquisition plans and buying vessels in the second hand market instead of placing new orders as overseas funding, their biggest source of financing, dries up. Varun Shipping has slashed its acquisition budget this year by three quarters to $100 million and will mostly buy from the second hand market as asset prices have fallen. However, Great Eastern Shipping Co will buy just one tanker worth $52 million in 2009-10 while Garware Offshore Services has no planned CAPEX for the year.

V Ashok CFO of Essar Shipping Ports & Logistics said “Overseas banks are still following a wait and watch practice. There is no appetite for funding of ships. Virtually the market is sleeping.” Officials and analysts said apart from lower earnings from vessels due to a slump in freight rates, high interest costs and asset valuation are also discouraging new purchases.

A report by HSBC Shipping Services said asset prices in the second-hand market have slumped to half or even less of their peak values last year due to an oversupply situation in certain segments, a big drop in freight rates and lack of funding.