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Key Positives For The Indian Shipbuilding Industry: Geographic Location

The shipping industry is experiencing high demand which is benefiting Indian shipyards. Indian shipyards have seen a 92.9% annual growth in orders between 2003 and 2008 as global shipbuilding slots fill up. India currently has a small 1.17% share of the global shipbuilding market but this is expected to grow to 15% by 2020 due to lower costs and skilled labor. While the outlook is positive, the shipping industry is cyclical in nature and faces risks from overcapacity in the long run as well as economic slowdowns and lower energy demand globally.

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35 views2 pages

Key Positives For The Indian Shipbuilding Industry: Geographic Location

The shipping industry is experiencing high demand which is benefiting Indian shipyards. Indian shipyards have seen a 92.9% annual growth in orders between 2003 and 2008 as global shipbuilding slots fill up. India currently has a small 1.17% share of the global shipbuilding market but this is expected to grow to 15% by 2020 due to lower costs and skilled labor. While the outlook is positive, the shipping industry is cyclical in nature and faces risks from overcapacity in the long run as well as economic slowdowns and lower energy demand globally.

Uploaded by

analyst_anil14
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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OVERVIEW

The shipping industry is riding on the back of a huge boom in commodities and the Baltic Dry
Index. The soaring demand for ships to transport cargo across oceans, combined with a scarcity of
shipbuilding slots in maritime strongholds such as Korea, Japan and China are helping
Indian shipyards to grab more orders from global fleet owners for new cargo carrying ships.
In the last five years, the orderbook position of Indian yards has grown by 92.9% CAGR from
Rs.816 crore in 2003 to Rs. 21,800 crore as on 31 December 2008.
Currently, India stands at the fourth position with a share in the global shipbuilding market
at a paltry 1.17%.
According to a report prepared by Mumbai-based consultancy firm Imaritime Consultancy Pvt. Ltd,
India's share in the global shipbuilding market, a highly labour intensive industry, is expected to
reach 15% or US$ 22 billion by 2020, aided mainly by cost competitiveness and abundant supply of
cheap, skilled manpower.
Indian shipyards can currently build ships with a combined cargo carrying capacity of 2.8
million tonnes (MT), compared to 12.2 MT for China & 11.5 MT for South Korea. India currently
exports 68% of its new offerings to the international markets.

Key positives for the Indian Shipbuilding Industry


Geographic Location
India's strategic geographical location acts as a harbour for the rising global seaborne trade
between Europe, USA & Australia. Besides it has 12 major ports & 185 intermediate ports which
makes it more favorable. India's long coastline measuring 7,617 Km. in length makes it easier for
shipyards to build & repair ships of all types & sizes.
Relatively low cost of highly skilled & technical labour

Concern
Cyclical nature of the industry
The shipping market is cyclical in nature and freight rates tend to be highly volatile. Freight rates
and Earnings of shipping companies are primarily driven by the demand-supply situation. While
demand drivers are a function of world trade growth and trade patterns, the supply drivers are a
function of new shipbuilding orders and the scrapping of existing tonnage. The cyclical nature of
the shipping market means highly variable workloads. Also, the prices to build new ships may
fluctuate significantly according to market conditions. The governments try to maintain capacity
through subsidies even as other macro factors like oil prices and global GDP growth, among
other factors, impact the cyclicality of the business.
Overall, the Indian Shipbuilding industry is set to embark on strong growth path over the next
few years on the back of cheap labour, expertise in building OSVs and PSVs backed by firm Oil
prices, government initiatives to support the industry and earlier time slots available compared
to the overseas shipyards. Clearly, the Indian shipyards enjoy a definite edge over their
global peers.

Serious over-capacity in the long term


Economic Slowdown
Dip in global demand for energy

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