Shipping Sector Analysis Report 

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• India has 12 major and 200 notified minor and intermediate ports. The Indian ports and shipping industry plays a vital role in sustaining growth in the country's trade and commerce. India is the sixteenth largest maritime country in the world, with a coastline of about 7,517 km.
• Since ports handle almost 95% of trade volumes in India, the rising trade has contributed significantly to the country’s cargo traffic. Capacity at major Indian ports reached 1,477 million tonnes by FY19.
• The Government of India has allowed foreign direct investment (FDI) of up to 100% under the automatic route for projects related to the construction and maintenance of ports and harbors. Ports sector in India has received a cumulative FDI of US$ 1.64 billion between April 2000 and June 2019.
• Approximately 10,000 jobs were created through projects initiated under Sagarmala during last three years. In August 2019, India became the first country in the world to issue Biometric Seafarer Identity Document (BSID), capturing the facial bio-metric data of seafarers.
• As regards India, the ports and shipping industry plays a major role in sustaining growth in the country's trade and commerce. As per the Ministry of Shipping, around 95% of India’s trading by volume and 70% by value is moved through maritime transport.
• Freight rates and earnings of the shipping companies are primarily a function of demand and supply in the markets. Demand drivers are a function of trade growth and geographical balance of trade (which determines the length of haul required). On the other hand, the supply drivers are a function of new ship building orders as well as scrapping of existing tonnage.
• The industry is regulated by the rules and regulations of International Maritime Organization (IMO), classification society, and the requirements of the flag state. Apart from these, there are also the rules and regulations of various countries where the vessel operates.

• Supply
• Supply is determined by the addition to shipping capacity. Also, factors such as ordering and scrapping influence the supply in this industry. On the ordering side, for example, the number of vessels that a shipyard can build and the time taken to build a vessel plays an important role in determining the growth in tonnage supply. On the scrapping part, decline/delay in scrapping activity would lead to oversupply of vessels.
• Demand
• Demand in the shipping industry is largely determined and is closely related to the growth in world trade.
• Barriers to entry
• High capital investments and the requirement of adequate cash flows act as major barriers to entry in this space. Moreover, critical factors such as expertise and technical know-how are some of the pre-requisites that limit the entry in this industry.
• Bargaining power of suppliers
• Is diminishing on the back of gradual increase in fleet supply and intense global competition.
• Bargaining power of customers
• High bargaining power as competition is high in the industry.
• Competition
• Competition is price based. However, companies with younger fleet command a premium. Companies operating in this space not only face competition from the domestic players but also from international shipping companies.

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Financial Year '19

• India’s total external trade grew to US$ 838.5 billion in FY19, implying a CAGR of 5.53% since FY09. Merchandise exports during the year were US$ 331 billion while imports reached US$ 507.4 billion.
• India’s merchandise exports and imports stood at US$ 160 billion and US$ 243 billion, respectively. In September 2019, Adani Port and Special Economic Zone (APSEZ) became the first Indian port operator to handle cargo movement of 200 million tonnes (MT) in 2018-19.
• As per Union Budget 2019-20, the Jal Marg Vikas Project for enhancing the navigational capacity of Ganga, a multi modal terminal at Varanasi has been functional since November 2018. The government has also initiated National Maritime Development Programme (NMDP), an initiative to develop the maritime sector with a planned outlay of US$ 11.8 billion. As of Union Budget 2019-20, the total allocation for the Ministry of Shipping is US$ 272.2 million.
• In FY19 traffic has increased 2.9% year-on-year to 699.1 million tonnes. Cargo traffic at non-major ports was estimated at 281 million tonnes FY19.
• Capacity at non-major ports is expected to reach 968 MMT in 2019 from 750 MMT in 2016. Given the positive outlook, proposed investments in major ports are expected to total US$ 18.6 billion by 2020, while those in non-major ports would be US$ 28.5 billion.

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Prospects

• Shipping is a global business whose performance is closely linked to the state of the global economy. Therefore, if global economic growth is adversely impacted, it could have an unfavorable effect on the state of the shipping market.
• Increasing investments and cargo traffic point towards a healthy outlook for the Indian ports sector. Providers of services such as operation and maintenance (O&M), pilotage and harboring and marine assets such as barges and dredgers are benefiting from these investments.
• Although the number of firms which are active in the Indian shipping industry are fluid, during any given year, there may be as many as 55 shipping companies. About 40% of them deal with coastal trade, while 50% focus on overseas trade. The remaining companies operate in both types of trade for the industry.
• The fortunes of our industry are positively correlated with the economic state of the world at large and, therefore, a continuation of the trade war or possibly an escalation of the same will not augur well for our industry.
• IMO 2020 could be biggest regulatory disruption shipping industry has witnessed in multiple decade. Ships are burning high sulphur content in marine oil from currently permitted 3.50% m/m to 0.5% m/m with effect from January 2020.
• As ships are likely to go off hire for the scrubber installations in order to prepare for IMO 2020, fleet supply across sectors could be curtailed, especially in H2 FY20. Crude tanker order book has come down the last few years and is now at 11% of the fleet and products tanker order book to fleet is at historically low of 7.5%.

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Related Links for Shipping Sector
Quarterly Results | Sector Quote | Over The Years

Views on News
SHIPPING CORP Announces Quarterly Results (3QFY21); Net Profit Down 63.7% (Quarterly Result Update)
Feb 10, 2021 | Updated on Feb 10, 2021
For the quarter ended December 2020, SHIPPING CORP has posted a net profit of Rs 1 bn (down 63.7% YoY). Sales on the other hand came in at Rs 8 bn (down 33.1% YoY). Read on for a complete analysis of SHIPPING CORP's quarterly results.
G.E.SHIPPING Announces Quarterly Results (3QFY21); Net Profit Down 46.7% (Quarterly Result Update)
Feb 1, 2021 | Updated on Feb 1, 2021
For the quarter ended December 2020, G.E.SHIPPING has posted a net profit of Rs 2 bn (down 46.7% YoY). Sales on the other hand came in at Rs 8 bn (down 30.1% YoY). Read on for a complete analysis of G.E.SHIPPING's quarterly results.
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Nov 20, 2020 | Updated on Nov 20, 2020
Here's an analysis of the annual report of G.E.SHIPPING for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of G.E.SHIPPING. Also includes updates on the valuation of G.E.SHIPPING.
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Mar 20, 2019 | Updated on Mar 20, 2019
Here's an analysis of the annual report of ABAN OFFSHORE for 2017-18. It includes a full income statement, balance sheet and cash flow analysis of ABAN OFFSHORE. Also includes updates on the valuation of ABAN OFFSHORE.
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