SCI in expansion mood

Shipping Corporation of India (SCI) has outlined a $4 billion capex to expand its fleet of vessels by 2012. The company, which had put new acquisitions on hold pending correction in the shipbuilding prices, now plans to place orders for another 36 ships, as it anticipates improved demand for shipping services beginning 2011.

Government-owned SCI is cashing in on the continuing downturn in the sector, which is giving it the ability to buy second hand vessels at rock bottom prices. New acquisitions are expected to help the company modernise its fleet and create additional capacity in the tankers segment (used to transport crude oil) as well as the dry bulk cargo segment.

“Some of the new assets will be second hand buys because their prices are far lower than new buildings. Our thrust is on the energy sector and these will be crude and product tankers, bulk carriers and offshore vessels. They are likely to be delivered by 2012,” said SCI chairman S Hajara.

While prices of new buildings are down by 30%, second hand vessels have seen price drop of 50-70% in some segments, making them a good buy, he pointed out. SCI?s current order book stands at 32 vessels of about 1.9 million DWT. The total cost of 32 vessels is $1.6 billion. The 36 new ships will cost another $2.4 billion.