Tata NYK Shipping Buys New Bulk Carriers from Japanese Shipyards

Tata NYK Shipping Pte Ltd will purchase three new dry bulk cargo carriers from Japanese yards as part of a plan to expand fleet to ship at least half of Tata group’s expected cargo of 60 million tonnes (mt) in the next few years. The new ships, scheduled to be delivered in 2012 and 2013, will add to the 16 ships run by Tata NYK, a joint venture between Tata Steel Ltd and Japan’s second largest dry bulk ship operator NYK Line Ltd.

“We have ordered three supramax ships from Japanese shipyards,” said Rajiv Mukerji, managing director of Tata NYK. He did not reveal the value of the ships, which are under construction at Japan’s Tsuneishi Group (ZHOUSHAN) Shipbuilding Inc. and Oshima Shipbuilding Co. Ltd.

Supramax dry bulk ships can navigate the Panama and Suez canals and carry 63,000 tonnes of dry bulk commodities. A supramax ship costs about $33-34 million to build at Japanese yards, according to Norwegian ship-broking and investment bank RS Platou ASA.

Tata NYK was formed in 2007 to ship raw material and finished steel for Tata group, allowing it strategic control over logistics, besides servicing other customers. It currently owns two supramax carriers and has hired 14 more from other companies, including its partner NYK Line.

“We will look at further acquisitions in terms of purchase or time charter (long-term hire) in other segments, such as panamax and capesize ships at the right time and opportunity,” Mukerji said. “We have some projects, which we are trying to develop and, if successful, we will look at debt/equity options maybe next fiscal year.”

Panamax dry bulk carriers can carry 79,000 tonnes of cargo and pass through the Panama canal fully laden. Capesize are the largest dry bulk carriers, with a capacity to load 180,000 tonnes of dry bulk commodities.

In the next few years, Tata group will need to transport around 60 mt of cargo annually.

“We cannot carry all 60 million tonnes on Tata NYK vessels,” Mukerji said. “It will also be important for the group companies to deal with other (shipping) companies to get an independent sense of the market as also diversify their exposure. However, our target is at least 50% as mandated by our promoters and we should be able to achieve that.”

The joint venture, Mukerji said, has grown rapidly in terms of cargo carried over the last four years. It currently ships about 9 mt of dry bulk cargo.

“Being a young company, we have tried to build competencies in a structured manner leveraging the strength of our promoters. We have been able to compete with the best, although there is scope to further strengthen our competitive position,” Mukerji said. “We are doing this by continuous cost reduction, innovative freight solutions and leveraging NYK fleet position.”

Analysts said capacity addition will help Tata group.

“A group like Tata will have a steady demand for iron ore and coal for the production of its steel, so by owning their own ships, they can control the delivered cost of the commodity, potentially leading to cost savings over the long-term,” said Nneka Chike-Obi, a dry freight analyst at London-based ICAP Shipping Ltd.

“Assuming an average life of 25 years for a bulk carrier, we would certainly expect that over such a period, rates will rise and fall in such a way that ownership is a more attractive choice for firms that expect a steady flow of raw materials over that time span,” she added.

P.Manoj (LiveMint)