INDIAN SHIP BUILDING INDUSTRY

OUTLINE

Global shipbuilding demand and supply

Indian shipbuilding industry
Indian shipbuilding projections & targets
Comparisons
What Indian Shipbuilding Industry needs
INDIA OPPORTUNITY BRIC
ECONOMIES

• India has a pool of well educated, skilled, enterprising

young work force. As per Goldman Sachs report on
BRIC economies - India will be the third largest economy
by 2025 .The adage that China is world’s factory floor
and India its back office is looking outdated.
• World economic growth has been around 4% for last few GLOBAL TRADE IN B
TONS
years. India’s GDP growth at 9%.
• Global Mercantile Trade has been growing at double the
rate at 8%. India’s trade is growing at >20%. Tonnage
handled in ports is expected to grow from the present
level of 500 million tons to 1000 million tons by 2009-10.
• Indian merchant fleet, numbering 811 with 9.05 m GT,
average age 18.3 yrs, carries only 13% of trade. Has a
huge potential of growth. India’s shipbuilding industry is 1000
growing at >30%.
• Unlike past, emerging dynamic developing countries like
China, India, Brazil are driving world economy.
INDIA’S
TRADE
 INTERNATIONAL SEABORNE TRADE
(Millions of Tons)

In 2006, goods loaded at

ports worldwide was 7.4
billion tons.

This is equivalent to
annual growth rate of
4.3%

Source : Estimated by UNCTAD

 STRONG DEMAND FOR SHIPPING

•The Global 1,600

World Fleet Outlook - mGT
Reference Case
Shipping Fleet 1,400 Dry Cargo 1,601
has been growing Chemical
Gas Carriers
at 8.6%. 1,200
Container Ships
1,196
Bulk Carriers
1,000
Oil Tankers
•World fleet
800
Crossed the 776
billion dwt mark in 600

early 2007 and

400
stands at 1.04
billion dwt. 200

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source ABS
 NEW ORDERS, COMPLETION & ORDERBOOK

Source : UNTACD and Tradewinds 29 Feb 08

 W BENGAL
1. CIWTC 2. GRSE
3, HDPE 4. SHALIMAR
9 PUBLIC SECTOR 5. AC ROY 6. CORPORATE

19 PRIVATE
SECTOR
GUJARAT
1. ABG 2. L&T
TOTAL 27
3.ALCOCK ASHDOWN
4.PIPAVAV 20 DRY DOCKS
40 SLIPWAYS
MAHARASHTRA
2. MDL 600,000 DWT ANDHRA
3. BHARATI 1. HSL

GOA
1. CHOWGULE
2. DEMPO
3. GSL

TAMIL NADU
TEBMA

KERALA
CSL
 ORDER BOOK

RUPEES
CRORES
EXPORTS

IN 2002 THE EXPORT

WAS NEGLIGIBLE
 MARKET POTENTIAL

•To maintain current share (13%) an addition of 15 m

GT needed (New and Replacement). Projected
investment is $20 billion.

•India’s overseas trade is projected to grow to 1000 m

tons by 2009-10. Additional tonnage required to meet
this is 100 m DWT.

•26.2% of world Fleet constituting 273 m DWT is 20

yrs & older and will need replacement in next 10 yrs.
 SHIPBUILDING POTENTIAL
The global order book
is 500 m dwt

With Indian trade

requirement of 100 m
dwt …………

• Demand for new

building will remain
strong
• Every 4th ship on order
in the world will be for
serving Indian trade.

SHOULD THIS HUGE OPPORTUNITY BE GIVEN TO FOREIGN

YARDS OR USED FOR GROWTH OF INDIAN SHIPBUILDING?
 ACHIEVABLE TARGETS
ORDER BOOK AND DELIVERIES
(DWT IN MILLION TONS)

THIS TRANSLATES TO
30% Y-O-Y GROWTH
 PROJECTED GROWTH OF INDIAN SHIPBUILDING

EMPLOYMENT POTENTIAL
YEAR 2007 2012 2017
NUMBER 50,000 180,000 500,000
ECONOMIC VALUE ADDITION
VALUE ADDITION 2012 2017
(Rs Crores) (Rs Crores)

1. INCREASE OVERALL 64,000 3,42,000

ECONOMIC OUTPUT

2. TOTAL EMPLOYMENT 4,80,000 24,50,000

3. INVESTMENT 37,000 2,22,000

4. ADDITIONAL INCOME TO 4,500 26,000

THE GOVERNMENT
THROUGH TAX REVENUES

SOURCE: KPMG REPORT ON ECONOMIC BENEFITS, DISADVANTAGES FACED ABD

BENCHMARKING GOVERNMENT SUPPORT ACROSS COUNTRIES
 SHIPBUILDING OUTPUT (Million CGT)

If India has to achieve 7% of

world share then someone
is going to lose its share …..
Thus, the competition for
market share will be intense
and fierce .

INDIA 0.32 0.8% 0.89 2% 3.1 7%

SOURCE : Community of European Shipyard Association

(CESA)
 BUILD CAPACITY COMPARISON
Japan Korea China India

Total Building Tonnage in 12.1 11.5 12.2 0.5

shipyards in million DWT

Building berths for ships > 17 24 21 Nil

150,000 DWT
Building berths for ships > 10 17 8 Nil
250000 DWT

1. India presently has small ship building

capacity
2. To achieve 4 m dwt deliveries by 2011 it
will have to increase its capacity 4 times
its present capacity in next 5 yrs
3. To achieve 16 m dwt deliveries by 2016 it
will have to create a capacity of 8 million
dwt
 SUMMARY OF COST DIFFERENTIAL
Sector Domestic Export
.China Korea China Korea
CD, ED, VAT & Octroi 8.30% 8.30% 2.91% 2.91%
Service Tax 1.48% 1.48% 1.48% 1.48%
Corporate Tax 1.40% - 1.40% -
Charges towards Bank Guarantees 0.86% 0.86% 0.86% 0.86%
Interest on Working Capital 2.60% 1.60% 2.60% 1.60%
Interest on Capital Expenditure 0.74% 0.74% 0.74% 0.74%
Insurance Charges 0.40% 0.40% 0.40% 0.40%
Sea Freight differentials 3.90% 4.50% 3.90% 4.50%
Clearing & Forwarding 0.30% 0.90% 0.30% 0.90%
Bulk purchase discounts on purchase of 3.25% 6.50% 3.25% 6.50%
inputs
Forex Rate Disadvantages 23.33% - 23.33% -
Total Cost disadvantage 46.56% 26.68% 41.17% 21.29%
Price Disadvantage due to Discount 5-10% 15-20% 5-10% 15-20%
51.56%- 41.68% - 46.17% - 34.29% -
Total Disadvantage 56.56% 46.68% 51.17% 41.29%

Source KPMG
SHIP REPAIR INDUSTRY

• SIZE - 35 SRUs limited private participation

mainly Concentrated in 3-4 yards.

• EVER GREEN INDUSTRY - Constant source of revenue even in lean period

• GOOD MARKET POTENTIAL – World cargo fleet >1 billion dwt. Booming
offshore and energy sector

• LABOUR INTENSIVE - Promotes local employment and ancillary industry

• VALUE ADDED - Surge in conversions of SH Tankers

• STATUARY REQUIREMENTS – Special Surveys, ship maintenance

requirements
 WHAT INDIAN SHIPBUILDING NEEDS

NEW SHIPYARDS CONTINUATION OF

INCENTIVE
MODERNISATION AND
UPGRADATION OF
EXISTING FACILITIES LONG TERM
SHIPBUILDING POLICY
HIGH PRODUCTIVITY
RATIONALISATION OF
LOW CAPITAL COST TAXES, DUTIES, STATE
CONTROL
GROWTH OF ANCILLARY
INDUSTRY SUPPORT OF INDIAN
SHIPPING INDUSTRY
 GUJARAT W BENGAL
1. ABG 2. L&T 1. CIWTC 2. GRSE
3. ALCOCK 3, HDPE 4. SHALIMAR
ASHDOWN 5. AC ROY 6.
CORPORATE

THIS IS THE MAHARASHTRA

RIGHT TIME TO 2. MDL

3. BHARATI ANDHRA
1.HSL
INVEST IN THE 2.NSTL
3.NSDRC
INDIAN GOA
1. CHOWGULE
SHIPBUILDING 2. DEMPO
3. GSL
AND TAMIL NADU
REPAIR TEBMA
KERALA
INDUSTRY CSL
THE END
 O NE THO US AND AND O NE D AYS O F HIS TO R Y
A turkey before and after thanks giving

160

140

120
VARIABLE

100

80

60 SURPRISE

40

20

0 100 200 300 400 500 600 700 800 900

1000
DAYS
REQUIREMENT OF STEEL PLATES