** Sagar Sandesh print version ceases to be published from December 31, 2017. New look E-paper would be available from Jan. 1, 2018 onwards. free of cost.**

2018, a tough year for the Shipping Trade: MD, BLA

2018 a tough year for the Shipping Trade says Master Mariner K G Ramakrishnan, Managing Director Ben Line Agencies (India) PVT Limited

While Ben Line is a 150 year old name in the Shipping Industry, the story of Ben Line Agencies starts from around 1987 when the agency arm was set up and by 1992 switched to being a full-fledged third party agency at a regional level.

 Starting with exposure of liner and Owner agency across three countries, today BLA is present in 17 countries engaged in Agency, Logistics as well as Offshore support.

Mr K G Ramakrishnan has been at the helm of BLA since 2005 when the company was formed as a subsidiary of BLA Singapore. He is a Master Mariner with over 20 years of Sea going experience. Subsequently he had a successful career as General Manager of Bengal Tiger Lines before joining the BLA. He is a fellow of the Institute of Chartered Ship Brokers UK and a member of Institute of Master Mariners of India.

Describing 2018 as tough year for the shipping industry, Mr Ramakrishnan said while the earlier part of 2017 witnessed consolidation of freight gains from the second half of 2016, the latter part of 2017 has seen the rates fall on the main East West Corridor. The rate war is likely to intensify in 2018 unless the East West Trade explodes suddenly.

In an exclusive interview to Sagar Sandesh, Mr Ramakrishnan answered a wide range of questions from the current state of the industry to why the East coast ports of India are lagging behind and suffer from excess capacity.

Sagar Sandesh: Shipping Industry is a victim of Economic down turn and is witnessing ups and downs during the last 10 years. With over 200 container ships scheduled for delivery in the New Year 2018, what would be the impact on the industry?

K G Ramakrishnan: 2018 a tough year for the industry. While the earlier part of 2017 witnessed consolidation of freight gains from second half of 2016, the latter part of 2017 has seen the rates fall on the main East West Corridor.

Introduction of 100 plus mega container ships and capacity augmentation of existing 15k TEU ships will certainly put pressure on the companies acquiring those but more so on the companies and consortium who are not having the same in a rate war which is likely to intensify. Unless the East West trade explodes suddenly! The existing strategy of consolidation and Economy of scales will be really tested if the world growth does not move up.

SS: 2018 has been predicted a tough year for the container shipping industry. Freight rates are likely to come down drastically due to excess capacity. Will it help the cargo volume front?

KGR: 2018 a tough year. It is cargo which determines the freight and not the other way. Mere reduction of freight on containers can at best convert some low value cargoes from bulk to Containers and will not influence cargo volumes sizeably.

SS: East Coast ports in India are lagging behind compared to say Mundra, JNPT or Ports in Gujarat in attracting Container trade. Established Ports like Chennai is functioning at 50 per cent of its cargo handling capacity. The hinterland of East coast ports is confined to southern states of India. What would be your suggestion to deepen their hinter land?

KGR: While there are World Class Container Terminals in the East Coast, barring the Kolkata region, their capacity has far outstripped demand resulting in low capacity utilization.

While some of the private ports in the east coast are really pushing for the hinterland cargo by giving service and incentives, they also try to CREATE new cargo by converting break bulk into Containers.

Ultimately it is the connectivity and cost from Central India which will generate the volumes to make them vibrant. Railway and road infrastructure from Central India to East Coast Ports need to be substantially enhanced on par with the West Coast. This can happen only through government policy and action.

SS: Are Private ports like Mundra, Katupalli and Krishnapatnam are posing a serious threat to the established state owned ports? Please share your experience in operating from a private port and the state owned ports.

KGR: Terminals in Private Ports have a clear edge over terminals in government ports in many ways. Private ports are more recent and built with deeper drafts in Greenfield ports with better space and facilities. Their cargo handling rates are fully in their control and flexible to suit the demand while the Government port terminals are mandated by unalterable TAMP regulation which have outlived their purpose long back and currently work against the interest of all parties.

Private ports owning container terminals have much better marketing while the terminals in government ports do not have the similar support from the landlord ports.

SS: Though the shipping ministry has provided the necessary impetus to Coastal shipping, it has not picked up the way it should have. Despite several attempts, automobile movement from Chennai to Gujarat ports could not take off. What exactly is the problem the coastal shipping faces?

KGR: The government policies alone cannot drive coastal shipping. Though we claim to have a coastline of 7500 Kilometers, you cannot compare our coastline with China. Most of the shipping in our country is one way, movement from north to south. North India being a production centre and southern parts consumes it. It is one-way traffic, with very little return cargo.

SS: Can you give me an overview of Ben Line Agencies (India)ís India Operations.

BLA India is eleven years old in India and has established a good reputation as a Container liner agency and in Marine agency services. The addition of Project logistics in the last three years has added value though the market has been depressed and we look to see growth in this area.

The last few years of slow growth with various financial challenges has helped in streamlining our overall organization and have a much leaner and connected organization.

Considering that the Maximum growth in the world is expected to be in the East and that we are present in almost all the countries in this region would certainly help in the coming years in our growth and we look forward to.

SS: What ails East Coast ports?

KGR: Majority of ports in the East Coast are working 40-50 per cent of their cargo handling capacity because of the inherent nature of the Indian industry which is based in the north and finds its comfortable, infrastructure wise to move exports to ports in Western India.

The ports from Visakhapatnam to Chennai predominantly handle imports, the only exception being Krishnapatnam port which has more exports proportionally.

Availability of excess capacity in the East coast ports is a reflection of the way industry is situated in the country. Industrial belt of the country is based in Northern and Central India. It will not be unrealistic to describe Delhi as the biggest Port of India with many Inland Container Depots serving the NCR region itself with daily trains to the West Coast Ports.

Railway connectivity from Delhi has been designed over the years by successive governments at the centre predominantly to the West. CONCOR has been running freight trains Between Delhi and West coast ports for a long time due to the traffic density. The Mumbai Delhi dedicated freight corridor has further consolidated the connectivity.

It is a virtuous cycle where more cargo has generated better service and vice versa.

Moreover the Railway tariff has been designed in such a way that the freight for moving from the North to the Ports in Western India is much cheaper than to the ports in the East coast. Freight trains moving from the North to the East Coast ports have an added disadvantage of sharing the transport infrastructure with the passenger trains crippling the movement of cargo.

On an average, movement of cargo by rail from North to East Coast ports works out 40 per cent more expensive. Hence shippers prefer the overworked ports in the west coast than the ports in the east coast whose capacity is lying idle, Attempts by the terminals to attract cargo to the south from the national capital have not been successful due to the steep difference in rail haulage.

The ports in the east coast may be efficient but are unable to attract more cargo since large volume of export cargo from the hinterland is not available to them. Whatever exports the east coast ports do involve high end shipping of value added engineering goods, Hosiery goods from Tirupur, textiles and leather goods and agricultural products.

SS: Why Coastal Shipping has not taken off in India?

KGR: Government policies alone cannot drive coastal shipping. Though we claim to have a coastline of 7500 kilometers, you cannot compare our coastline with China.

Most of the Coastal shipping in our country is one way movement from North to South, with North India being a production centre and south which consumes it.

Coastal shipping has been used by heavy industries to ship raw materials like iron ore and coal from the East to the western ports. However, Coastal shipping cannot be panacea for all our transport issues as it needs different logistic environment for non bulk goods.

Coastal movement of cargo has been active in the west coast from ports in Gujarat to Cochin and Tuticorin, mostly dealing with imports from Gujarat. There is also an effort to link the eastern states with south and west by transshipping within the country.

Contrary to popular myth, moving goods from one inland point to another through coastal shipping need not necessarily be cheaper than the road. Citing an instance he said car movement by coastal shipping from Chennai to the dealers in Rajasthan, via Gujarat ports did not work out since it involved one coastal and two road movements. While there will be a marginal reduction in freight costs due to the coastal leg, the longer transit due to multiple handling may not be acceptable to the end consumer.

This does not take into account the environmental benefits of moving cargo over sea and based more on commercial reality.

What coastal container shipping has achieved in the country has been due to the efforts of smaller companies or entrepreneurs who have converted road cargo to ships through their endeavour. The absence of our bigger shipping companies in this domain is noticeable.

Another hindrance coming in the way of coastal shipping is our customs and immigration Rules. While a truck load needs just a way bill, the documentation to send by sea is elaborate. Also there is variation in the way these are applied from port to port and from officer to officer. The arrangement is ad hoc since the government is yet to formulate the standard operating procedure to deal with the situation.

On the basis of alleged security concerns, immigration authorities have made most of our anchorages outside Ports unusable even in ports in southern India. Ships are not allowed to bunker, undertake repair work or any activity connected with shipping in outer anchorages. This is another disincentive to coastal shipping and shipping in general. It also curtails commercial activity at most ports with most service providers opting to close down in the absence of opportunities. The claim of 7500kms of coastline falls flat when much of the seafront and anchorages cannot be put to any meaningful use.

SS: On the outlook for container shipping industry in 2018.

KGR: Hopefully the industry will get over the consolidation phase in a yearís time. But with so much of tonnage being added to container ship fleet, it is unlikely to the freight rates will go up.

The industry is in for two added pressures of rising cost of fuel and introduction of restrictions of Sulphur emissions. With prices of petroleum looking up it is only question of time before bunkering costs move up and the time lag between this cost increase and freight increase can be crippling.

The upcoming restrictions on sulphur content in fuels to 0.5 per cent in the next two years imposed by the International Maritime Organization would mean serious investment to upgrade ships. With freight rates expected to remain low, the going will be tough for the industry. This will be a serious challenge to the domestic shipping companies and coastal shipping as well.

Disclaimer
Copyright © 2018 PORT TO PORT - Shipping Services Portal ( Sagar Sandesh ). All rights reserved.

Follow Us