At the beginning of June, India announced that it would set up a new national shipping company and expand its fleet to 1,000 vessels over the next decade. The plan has attracted a lot of attention in the shipping industry, with some questioning it but others describing it as a "bombshell" for the second-hand and newbuilding markets.
As previously reported by Maritime Circle Focus, India plans to set up a new national shipping company through a joint venture between the country's national oil, gas and fertiliser companies, the State Corporation of India (SCI) and foreign partners, which will work together in the acquisition, ownership and operation of tankers in order to reduce dependence on foreign shipping services, lower freight costs and boost the country's economic strategy. (For more information, see "New National Shipping Company Coming Soon! Target 1,000 ships!")
The new company, which will be headquartered in Gujarat's GIFT IFSC financial centre, seeks to compete with centres like Singapore through tax incentives and simplified regulations. The company will have access to about Rs3,000 crore ($3.6 billion) in Maritime Development Fund seed money and will work with major port authorities. In addition, India is encouraging state-owned enterprises to sign 15-year charter agreements with new companies to promote low-cost, long-term loans for shipbuilding rather than arranging single voyages or short-term charter agreements.
According to Greek shipbroker Xclusiv Shipbrokers, India's ambitious plans to set up a new state-owned shipping company is major news for the second-hand and newbuilding markets. Once the plans start to materialise, it will have a significant impact on the market.
According to an industry source, the new Indian national shipping company is likely to prioritise the procurement of second-hand vessels in order to quickly build up its fleet in the early stages of its establishment. This will lead to increased demand for second-hand vessels in the market and higher prices. And with the expansion of the fleet size, the new company's demand for new ships will also grow significantly, which will bring a large number of orders for global shipyards.
"The Indian shipping industry is dominated by bulk carriers and tankers, so the demand for buying, selling and newbuilding of these two types of vessels will be particularly strong." The industry source added.
Indian shipping data for 2022, as compiled by the Ministry of Ports, Shipping and Waterways, shows that by the end of 2022, the size of the Indian fleet will be 1,520 vessels with a gross tonnage of 13.69 million tonnes, of which 1,034 will be coastal vessels and 486 will be ocean-going vessels, with 56.6% of the gross tonnage of oil tankers, 15.7% of the gross tonnage of dry bulk carriers, and 23.1% of the gross tonnage of dry bulk liners.
Industry insiders said: "Due to India's own shipbuilding capacity is limited, and shipbuilding technology and equipment with China and South Korea and other shipbuilding powerhouses still have a big gap, if India successfully promote this plan, in the bulk carrier and tanker newbuilding market dominated by Chinese shipyards may become the biggest winner."
According to CITIC Futures Research earlier released "Emerging Markets Series Topic: India Shipping Market Introduction and Future Prospects" report (click on the hyperlink to view the article), India currently has 35 shipyards, about 25 shipyards in operation, shipyards are mainly distributed in coastal areas. Indian shipyards are mainly state-owned and mainly build small and offshore vessels. In terms of global share, India's share of the global shipbuilding market is less than 1%.
Currently, the global shipbuilding industry is concentrated in China, South Korea and Japan. China Ship 2023 Annual Report shows that in 2023, China, Japan and South Korea shipyards undertook a total of 1,542 new ship orders, 10,547,000 DWT, 39,457,000 Gross Modified Tons (GT), and the sum of the market share of DWT and GMT was 97.1% and 94.7% respectively.
Among them, China continues to maintain its leading position in the field of bulk carriers, PCCs and LPG carriers, and significantly improves its competitiveness in the field of oil tankers, with a total of 1,117 new ship orders, 72,946,000 dwt and 24,927,000 mwt for the whole year, representing a year-on-year increase of 30% in terms of deadweight tonnage. South Korea is focused on gas ships, container ships and other high value-added ship types, Japan's new ship orders fell for two consecutive years.
However, despite India's "thousands of ships plan" ambitious, but some industry insiders do not "buy".
In addition to questioning India's shipbuilding capacity, some industry insiders also believe that the issue of funding is also a major challenge. Although India plans to set up a Rs300 billion (about $3.6 billion) Maritime Development Fund, such a large shipbuilding programme will require much more than that. How to sustain adequate financial support over the next decade remains unresolved.
In addition, India's national credibility has been called into question. Frequent changes and adjustments in government policy have led many investors to question the reliability of its long-term plans. Although the current government is committed to advancing the shipping industry, future changes in government or policy direction may cause this plan to be shelved or adjusted. This policy uncertainty has caused international markets to have reservations about India's long-term commitment.
At the same time, there are longstanding concerns about India's administrative efficiency and bureaucracy. Cumbersome administrative procedures and inefficient execution could slow down the project, while corruption will increase the cost and risk of the project and could affect its transparency and fairness. These issues have undermined market confidence in the Government of India's execution of large-scale shipping programmes.
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