Essar Shipping Looks to Increase Revenue from 3rd Party Cargo

Mumbai: Essar Shipping aims to increase third party cargo handling to 50% of its total revenue by 2020 from 30% at present, as the company engages with companies in India and the Gulf, trying to make up for loss of captive business after the parent group’s oil refining company was sold and the steel business got stuck in bankruptcy proceedings.

“We are working with steel companies, not just in India but also Qatar and Bahrain among other Middle Eastern markets. We are focusing a lot on the Gulf areas which are in close proximity to us,” CEO Ranjit Singh told ET in a recent interview.

The company needs to look for new clients with a chunk of its captive business gone. Essar Oil was sold to Russian oil giant Rosneft, fund UCP and Swiss commodities trader Trafigura for $12.9 billion last year. Essar Steel is under insolvency proceedings before the National Company Law Tribunal.

Essar Shipping has also bid for the tender floated by state-run oil marketing companies Bharat Petroleum Corp and Indian Oil Corp for carrying crude oil. Some clarity on the bids will emerge by end of April, said Singh, adding the company is looking to acquire a very large crude carrier (VLCC) and a Suezmax if it wins the deal.

Essar Shipping handled 13.06 million tonnes of cargo in FY17 and registered a 28% growth in total cargo tonnage in the third quarter of FY18. The company is set to increase capacity from 15-16 million tonnes to 20-21 million tonnes by FY19 with increase in tonnage and higher operational efficiency.

The company operates a fleet of 14 ships that include two VLCCs, one capesize ship, six mini-capesize ships, one panamax bulk carrier, two supramax bulk carriers and two 13,000 dead weight tonnage (DWT) general cargo ships.

Analysts said getting fresh third party business wouldn’t be so easy in these times of still weak economic activity and oversupply in shipping capacity. “Charter rates are on adownward spiral and there are numerous players in the market. The problem of overcapacity persists and it would be difficult to get new business for a player,” said a senior analyst requesting anonymity.

Singh said that while the dry bulk has improved since its downward spiral starting 2008 — the benchmark Baltic Dry Index has increased four times from its February 2016 low — the crude segment has hit “rock-bottom”. Essar Shipping’s revenue for the December quarter was ₹150 crore, down 6% compared with the previous quarter, and almost flat on year. Singh attributed it to the weakness in the crude segment and said things are expected to improve from December.

Essar which is big on coastal shipping said it has been getting enquiries from auto component companies and car makers on the feasibility of ferrying cargo by the coastal sea routes. “Coastal shipping is extremely promising. Carrying cargo by one ship could potentially move 400-500 trucks out of the roads,” he said.

Source: The Economic Times (24 March 2018)