Maritime Matrix May 2023

SETTING A COURSE FOR THE FUTURE

14001:2015

45001:2018

9001:2015

Taking Baby Steps in Building a Maritime Innovation Ecosystem

The Ministry of Ports, Shipping and Waterways (MoPSW), last Monday issued a draft ‘Sagarmala Innovation and Start-up Policy’ with an aim to nurture startups and other entities to co-create the future of India’s growing maritime sector.

The draft policy identified several key areas for the startups to flourish in, including decarbonisation, optimising processes through data, maritime education,

multi-modal transportation, manufacturing, alternate/ advanced materials, maritime cyber-security, smart communication and marine electronics.

Through this policy, MoPSW desires to enable startups to grow and prosper through innovation.

Appreciating the initiatives taken by the centre, many in the Indian mercantile marine industry have welcomed the move; but be it the academia or the industry stakeholders, reservations about it abound as all this is still at a nascent stage.

It seems that the government machinery is all set to finalize the fine print of the new maritime syllabi on Skill Development programs, and on Inland water ways.

- Padmesh Prabhune

Sources say while they are ready to introduce the tailor made courses, the real challenge lies in maintaining the balance, for it has to be a win-win situation for training institutes from both, financial as well as operational, aspects.

Primarily the challenges would be in maintaining all inclusive courses along with a regular standard regime, duration, and above all, with maximum students’ participation. The fee structure too has to be affordable for both- students at Pre-sea level and existing Seafarers. The financial affordability of those already sailing on foreign ships and the ones pursuing entry level studies are not comparable.

Also, it seems an option in medium of instruction could be helpful, preferably in regional languages as English at times acts as a barrier. Else faculty who can also explain in regional languages could be an alternative.

While the syllabi will be known only once it is out, most of the industry players Marex spoke to seem to be satisfied, acknowledging the fact that finally some initiatives are being taken for betterment of the industry.

While K A Sudesh, Director, Monter Shipping & Logistics (India) Pvt Ltd. noted that the draft policy very elaborately covers the points and is well thought out, Amit Oza, Director Astramar Shipping & Trading, said, “It is a great step in the right direction and provides the way forward.”

“India has a limited presence among global maritime players who operate assets; so given this backdrop it may require careful mapping of the existing maritime commercial model to make viable plans for start-ups.”

Agreed D Niseeth, a media professional, who said that the Sagarmala Draft Policy is an appropriate step that will assist in creating a strong ecosystem for enabling startups and innovation in India, adding, “Over the span of 8 successful years of Sagarmala, the maritime sector has captured all the possible opportunities for the portled development, and as one knows various initiatives and projects have been undertaken to facilitate shifting of cargo from conventional landbased transportation to coastal shipping mode.”

Pointing towards the innovation and digitalization angle, Arathi Narayanan, Head -Administration, ABS Marine Services, said, “Digitalization would definitely help in completing regular procedures with faster turnaround times. The time spent in obtaining clearances, especially for Indian flag vessels, is very long and tedious and perhaps this would be addressed as well.

“Also, creating awareness of mercantile shipping among general public and higher skill development with economical simulation training, will definitely add to skilled manpower in areas of diversified offshore operations.”

While the draft policy has emphasized on developing a centralized repository containing all pertinent information to assist emerging entrepreneurs, further mentioning about a need to collaborate with national and international stakeholders for mentorship and knowledge sharing, and facilitating access to global subject matter experts, serial entrepreneurs, business leaders, and investors with the potential to get their entry and scaling in India, it has not discussed anything on asset creation and how this might be incorporated gradually.

Perhaps this is the first baby step in the right direction for the policy aims to create a field to establish longterm action plans, networks, infrastructure, and other resources to build a robust maritime innovation ecosystem.

- MMT

Significance of Classification Society in the Maritime industry

Ship Classification is a system for controlling or regulating the material state of the ship. The primary function of a classification society is to promote safety of life, property and protection of the marine environment.

The origin of classification societies can be traced back to the 18th century where marine insurers, based at Lloyd’s coffee house in London, developed a system for independent inspection of the hull and equipment of ships prior to providing an insurance cover.

During that time, an attempt was made to ‘classify’ the condition of each ship on an annual basis. The condition of the hull was classified A, E, I, O or U, according to the excellence of its construction and its adjudged continuing soundness (or otherwise). Equipment was classified as G, M, or B: meaning good, middling or bad. Role of Classification Societies includes

• Promotion of safety of life, property and the protection of marine environment.

• Developing technical standards (rules) for design and construction of ships based on extensive research & development and service experience, subject to constant refinement.

• Approve designs of ships against their developed standards (Rules).

• Act as a Recognised Organisation to carry out statutory surveys & certification as delegated by maritime administrations from whom they are authorised and the ship is flying the flag of the maritime administration.

• Conduct surveys during construction to satisfy the ship is built in accordance with the approved design(standards/rules) and to the requirements of the statutory Rules/ Regulations.

• Conduct in-service inspection and periodic survey during operation towards maintaining classification and statutory certification as per class standards/ rules and statutory regulations.

• Research and development programmes.

• Support international organisations – IMO, IACS, ISO, Flag administrations etc.

• Conduct training/awareness programmes for their own surveyors and stake holders.

Delegated Inspection Authority

Maritime flag administrations worldwide oversee the regulation and compliance of maritime assets against laid down international and national regulations. Being a global industry requiring authorities to maintain offices worldwide, many maritime flag administrations have opted to delegate work to Classification Societies. They authorise classification societies to operate as a Recognised Organisation (RO) and utilise their experienced surveyors and global network.

Scope of delegated work is outlined in the respective agreement between the Flag State Administration and the Classification Society based on RO code. RO code forms the basis against which Recognised organizations are assessed towards recognition & authorization and for the oversight by flag States.

Indian Register of Shipping

Indian Register of Shipping is amongst the top 10 international ship classification societies and a Member of the International Association of Classification Societies (IACS). It is authorised as a Recognised Organisation by 46 maritime administrations worldwide including European Union.

In the recent years, IRS has achieved strong and sustained business growth with inroads into new markets. The last 12 months has seen fleet addition of over 200 ships with more than 7 million GT – and an increased global geographical presence.

Working towards decarbonisation, IRS is actively playing a role in development of new fuel ecosystems as well as improving energy efficiency.

Decarbonisation continues to remain high on the agenda for the organisation as the industry looks to reduce carbon emissions. Several initiatives have been taken towards the development of alternative fuels ecosystem. IRS has conducted successful trials using biofuels with encouraging results. Rules have been developed for Ammonia and Hydrogen-fuelled vessels, as well as Fixed Offshore Wind Turbine installations.

Classification of the first hybrid battery-powered catamaran, built by Indian shipbuilder Cochin Shipyard, was another highlight. The catamaran ferry, designed for shore charging is propelled by a hybrid-electric propulsion system by means of lithium titanium oxide (LTO) batteries and DG Sets.

Indian Register of Shipping (IRS) is closely working with Cochin Shipyard Ltd towards indigenous development of hydrogen fuel cell vessel. In addition to this, two projects are also underway – to develop technology demonstration of remotely controlled vessel with L&T Defence and autonomous vessel with Mazagon Dock Shipbuilders Ltd.

IRS has also teamed up with a leading industry partner in its digitalisation journey based on global best practices and adoption experience. It will focus on Digital Twin concept, data analytics, knowledge management as well

as life cycle management of assets.

IRS is a preferred partner for Indian Defence forces and has been engaged in several pioneering projects for Indian Navy, including diving support vessels, shallow water ASW corvettes, survey vessels large, floating dock and various auxiliary vessels. IRS is involved in Indian Coast Guard new construction projects like fast patrol vessels, interceptor crafts, pollution control vessels and several others. A series of nine Floating Border Outposts (FBOPs) for the Border Security Force, Ministry of Home Affairs have been classed as well.

Towards improving inland vessel safety, IRS played an integral role in the drafting of the Inland Vessels Act 2021 and based on the IV Act 2021, IRS drafted rules in consultation with Ministry, State Governments and various other stakeholders. The draft Rules and Regulations for Construction and Classification of Inland Waterways Ships are ship-type specific to ensure safety of cargo, assets and the environment.

People are the core assets of any knowledge-based organisation. IRS ensures regular training and upskilling of its resources through structured training and regular mentoring. Training programs are conducted regularly for surveyors and senior staff towards ensuring continuous commitment to quality operations.

Summary

The Classification Societies authorised by a flag administration as Recognised Organisations play a crucial role in the maritime industry to establish and maintain technical standards for construction and operation of marine vessels, to monitor compliance to applicable regulations and to provide guidance and support to its stake holders.

IRS continues to be a dynamic, pioneering and influential force in the maritime spectrum. It has made great strides in the move towards sustainable shipping and remains a trusted partner to a host of maritime stakeholders. Constant shifts in the globally regulatory landscape notwithstanding, IRS’ reputation for excellence, quality and maritime safety remains unrivalled.

- MMT

Mr Vijay Arora Managing Director Indian Register of Shipping

The Author

Carbon Emission Control In Shipping

In the modern age, where an increased effort for natural sustainability is ever important, decarbonization is increasingly becoming a priority for many industries and companies. This is no exception for the shipping sector.

Carbon emissions from the shipping industry account for around 2.2% of global greenhouse gas emissions, making it a significant contributor to climate change. However, with the world becoming increasingly aware of the need to reduce carbon emissions, there is a growing push to control carbon emissions in the shipping industry. The International Maritime Organization (IMO) pledging to decrease the CO2 emissions rate by 50% by 2050, the industry is aiming for a decarbonated future.

There are many ways to achieve this aim.

1) Improved ship design and technology

Improved ship design can significantly help in cutting carbon emissions in shipping by reducing the amount of fuel required to operate the vessel. Here are some ways that improved ship design can achieve this:

I. Energy-efficient hull design: By improving the hull design, ships can reduce drag and resistance while sailing, which means they can travel faster using less fuel. This can be achieved using advanced coatings, streamlined shapes, and optimized hull profiles.

ii. Hybrid propulsion systems: Hybrid propulsion systems that combine conventional engines with batteries, fuel cells, or other clean energy sources can reduce the amount of fuel needed to operate the vessel, resulting in lower carbon emissions.

iii. Fuel-efficient engines: Modern ship engines are more fuel-efficient than older models, resulting in

lower emissions. The use of high-efficiency engines, such as those that run on Duel Fuel technology, can significantly reduce carbon emissions.

iv. Energy-saving technologies: The implementation of energy-saving technologies, such as waste heat recovery systems, air lubrication systems, and advanced control systems, can also help reduce the energy consumption of the vessel and lower carbon emissions.

2) Use of low-carbon fuels

There are several types of low carbon fuel that can be used in shipping, including biofuels, hydrogen, methanol, and ammonia. Biofuels are derived from renewable resources such as agricultural crops and waste products. Hydrogen and ammonia can be produced using renewable energy sources such as solar and wind power.

One advantage of using low carbon fuel in shipping is that it can significantly reduce greenhouse gas emissions. For example, biofuels can reduce emissions by up to 80% compared to traditional fossil fuels. Hydrogen and ammonia have the potential to eliminate emissions entirely if produced using renewable energy sources. However, there are also challenges associated with the use of low carbon fuel in shipping. One significant challenge is the availability and cost of these fuels. Currently, low carbon fuels are more expensive than traditional fossil fuels. Another challenge is the infrastructure needed to store and transport these fuels. For example, hydrogen and ammonia require specialized storage and handling facilities.

Despite these challenges, many shipping companies are investing in the development and use of low carbon fuel. In addition to reducing emissions, the use of low carbon fuel can also help shipping companies meet regulations and reduce their environmental impact.

3) Improved operational efficiency

Improving operational efficiency can have a significant impact on reducing the carbon footprint of shipping. There are several ways in which this can be achieved:

i. Reducing fuel consumption: One of the most effective ways to reduce carbon emissions in shipping is to reduce fuel consumption. This can be done through various measures such as optimizing ship speed, maintaining engines and equipment, just-in-time arrival, and reducing idling time.

ii. Improving cargo handling: Another way to improve operational efficiency is to optimize cargo handling. This can include reducing loading and unloading times, optimizing stowage plans, and minimizing unnecessary ballast water exchange.

iii. Implementing energy-efficient technologies: Shipping companies can also improve operational efficiency by investing in energy-efficient technologies such as more efficient engines, LED lighting, and more efficient propulsion systems.

iv. Reducing waste and emissions: Reducing waste and emissions is another way to improve operational efficiency. This can include minimizing waste generation, using cleaner fuels, and reducing greenhouse gas emissions from refrigerants and air conditioning systems.

v. Voyage optimization: Maximizing efficiency and reducing costs during a voyage of a vessel, from one port to another. This involves making decisions on factors such as route planning, speed, fuel consumption, and cargo loading and unloading, with the aim of minimizing the overall time and cost of the voyage while ensuring safe and reliable transportation of goods. Modern technology and data analytics play an important role in voyage optimization. For example, computer models can simulate different voyage scenarios based on factors such as weather conditions, sea currents, and vessel performance data. This can help shipping companies to identify the most efficient route and speed, as well as optimize cargo loading and unloading schedules, fuel consumption, and maintenance activities.

4) Carbon pricing and emissions trading

Carbon pricing and emissions trading are mechanisms aimed at reducing greenhouse gas emissions by putting a price on carbon. Carbon pricing involves putting a price on the carbon

emissions associated with emission from ships. This can be done through various methods, such as a carbon tax or a cap-and-trade system. A carbon tax is a direct tax on carbon emissions, while a capand-trade system sets a cap on emissions and allows companies to trade permits to emit within that cap.

In the shipping industry, a carbon tax could be applied to fuel used by ships, while a cap-and-trade system could set a limit on the total emissions from the industry and allow companies to buy and sell emissions permits.

Emissions trading is a market-based mechanism that allows companies to buy and sell emissions allowances, creating a market for carbon credits. The idea is that companies that can reduce their emissions more easily can sell their allowances to companies that have a harder time reducing their emissions.

In the shipping industry, emissions trading could be used to create a market for carbon credits that would allow companies to offset their emissions by investing in projects that reduce emissions in other sectors or countries. This would incentivize companies to reduce their emissions and create a mechanism for financing emissions reduction projects.

5) Collaboration and partnerships

Collaboration and partnerships between industry players, governments, and NGOs can also help reduce carbon emissions in shipping. For example, the Global Maritime Forum, a nonprofit organization, is working to create a more sustainable and resilient maritime industry through collaboration between industry leaders, policymakers, and other stakeholders.

The carbon footprint of shipping is a growing concern for the industry, and the push towards greater carbon efficiency is likely to have significant effects on shipping finance. One effect may be an increase in the cost of financing for ships with higher carbon footprints. As investors become more focused on sustainability and carbon emissions reduction, they may be more hesitant to invest in vessels that are not environmentally efficient. This

could lead to higher interest rates or more stringent lending criteria for ships that do not meet certain carbon footprint standards.

On the other hand, vessels that are more carbon efficient may become more attractive to investors and lenders. They may be able to secure more favorable financing terms, or even attract additional investment from parties that are specifically interested in sustainable shipping. In addition, as regulations and carbon pricing mechanisms become more prevalent in the shipping industry, companies that operate less carbon-efficient vessels may face additional costs and penalties. This could impact their ability to repay loans or attract new investment, potentially leading to higher default rates and increased risk for lenders. The push towards greater carbon efficiency in the shipping industry is likely to have significant effects on shipping finance, and companies that can adopt more sustainable practices may be better positioned to attract investment and secure favorable financing terms.

In conclusion, reducing carbon emissions in shipping is crucial to combatting climate change. By using a combination of improved ship design and technology, low-carbon fuels, operational efficiency, carbon pricing and emissions trading, and collaboration and partnerships, the shipping industry can play its part in reducing global carbon emissions. It is important for all stakeholders to work together to achieve a more sustainable and environmentally friendly shipping industry.

- MMT

The Author Capt Sanjeev Verma Ship Manager, Hong Kong

Team Matrix

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Sonowal Visits IRS, Stresses on EcoFriendly Technological Advancements

- Padmesh Prabhune

Union Cabinet Minister for Ports Shipping & Waterways and Minister of Ayush Shri Sarbananda Sonowal visited the Indian Register of Shipping (IRS), an international ship classification society providing ship classification and certification as well as technical inspection services, during his visit to Mumbai on the 25th May 2023.

Mr. Arun Sharma, Executive Chairman, IRS, honored the Hon’ble Minister for visiting IRS, and to mark the occasion further exchanged the contract documents with Dassault Systèmes for digital transformation and boosting operational efficiency.

Emphasizing that IRS had the potential to be a leading global organization, the minister laid great stress on technological advancement and adoption of technology, adding a caveat that such advancement should not be at the cost of ecology and environment. He congratulated IRS on achieving global recognition and strong fleet growth and urged IRS to take a greater role in

development of the maritime ecosystem and thus contribute towards achieving the Maritime India Vision 2030.

During his short visit, Sonowal interacted with the Rules and Research & Development team at IRS to understand various aspects of research projects. Moreover he spared some time interacting with the research team in understanding structural strength of marine assets, wind propulsion and impact of underwater radiated noise on marine life, along with environmental impact of shipping and the role of IRS in supporting design and operational methodologies using advanced technologies.

Appreciating especially the green initiatives of IRS, the minister appealed to everyone to ensure physical and mental well-being and actively participate in International Yoga Day on 21st June 2023.

Mr. Arun Sharma Shri Sarbananda Sonowal

50th Anniversary Celebrated at Kandaghat

The 1971-73 batch celebrated the 50th Anniversary of Passing Out from the TS Dufferin/ Rajendra at Kandaghat (Near Kasauli, HP) from 22nd to 25th March 2023.

A total of 41 Batchmates graced the occasion26 of them with their good ladies.

It was a wonderful 3 days, with the pleasantly cool weather adding to the enjoyment and bonhomie.

Attendees ranged from the US, Australia, Sri Lanka, Malaysia & and the mother country.

Direct Shipping Service between ‘TuticorinMaldives’ Launched

The service inducted under Prime Minister ‘Neighbourhood-First Policy’ is scheduled to make 3 calls a month on rotation

‘M.V. MSS Galena’ from V.O. Chidambaranar Port, the first direct shipping service between Tuticorin & the Maldives, reached Male on May 7, 2023.

Shri Shantanu Thakur, Minister of State for Ports, Shipping and Waterways, flagged off the vessel ‘M.V. MSS Galena’ from V.O. Chidambaranar Port, as the Direct Shipping Service between Tuticorin to Maldives on May 05, 2023. The rotation of this shipping service is Tuticorin –Male – Tuticorin, and is scheduled to make 3 calls a month.

The service inducted under Prime Minister Shri Narendra Modi’s ‘Neighbourhood-First Policy’ and the vision of Security and Growth for all in the Region to give impetus to bilateral trade between India & Maldives will not only cut logistic costs but will also reduce time with enhanced connectivity for transporting goods between the two countries.

The vessel ‘M.V. MSS Galena’ with carrying capacity of 421 TEUs of containers & provision to carry bulk cargo, deployed by The Shipping Corporation of India, had earlier arrived at PSA SICAL Container Terminal on May 4 2023. It was loaded with 270 TEUs.

Speaking of the service, Shri Shantanu Thakur said, “We are determined under the leadership of the Prime Minister and under the guidance of Union

Minister Shri Sarbananda Sonowal Ji, that cooperative efforts will grow the trade and maritime sectors of our nations in the Indian Ocean Region (IOR) and across the globe.”

Earlier the bulk cargoes bound to Maldives from Tuticorin were sent through barges & sailing ships and the containers bound for Maldives were routed through Colombo.

Marex Media

- Padmesh Prabhune

Maritime Technology in the Cusp of Transformation

Global merchant fleet consisting of around 80,000 vessels moves 11 billion tonnes of goods between 150 countries constituting 80% of world trade. For transportation of this volume of world trade Maritime shipping running almost entirely on fossil fuel was responsible for around 830 million tonnes of CO2 emissions worldwide in 2020 (880 Mt CO2 in 2019), which is around 2.5% of total energy sector emissions.

The shipping industry is undergoing unprecedented technological changes to contribute its fair share in global effort towards reduction of greenhouse gas emission for achieving the climate change goals of UNFCCC Paris Agreement using all possible means viz. enhancing energy efficiency through technical and operational measures and replacing fossil fuel with low and zero-emission fuels.

International Maritime Organization (IMO) has mandated three different types of regulations — design measures (Energy Efficiency Design Index), technical measures (Energy Efficiency Existing Ship Index) and operational measures (Carbon Intensity Indicator).

Ship designers / builders are responsible for ensuring compliance with design measures (EEDI). Ship owners / Technical managers are responsible for ensuring compliance with technical measures (EEXI) and Operators of ships are responsible for compliance with operational measures (CII).

Because of all above it makes sound business sense to enhance energy efficiency of ships.

Technologies which are available to significantly improve energy efficiency in the short, medium and long term include:

• Hulls with less resistance and improved steering configurations;

• Hull air lubrication systems;

• More hydro-dynamically-efficient aft-ship, propeller and rudder arrangements;

• Reduced air drag through improved aerodynamic efficiency of hull and superstructure;

• Lower energy consumption in main and auxiliary engines;

• Waste heat recovery and ship’s thermal energy integration;

• Miscellaneous technologies to reduce minor energy consumers including pipe insulation, LED lighting and air conditioning;

• Marine fuel cells (longer term);

• Use of wind power as supplement to propulsion engines power; and

• Use of light construction materials (longer term)

Key technical and operational means within ship operators’ scope to reduce the fuel consumption and CO2 emissions would include application of superior low friction antifouling coating, speed reduction, enhanced weather routing, optimized trim and ballasting, hull and propeller cleaning, better main and auxiliary engine maintenance and tuning, voyage optimization, efficient operation of larger electrical consumers, efficient deployment of new technology, and performance monitoring.

Collection and analysis of various ship operational data is therefore becoming crucial to identify means for enhancing energy efficiency of not only individual ships but shipping operation as a whole including interface with ports and shore-based logistics infrastructure. Artificial intelligence is making an inroad in operation of individual ships.

Introduction of low and zero-carbon fuels like biofuels and its blends, Methanol, Ammonia, Hydrogen etc. brings their respective operational challenges and safety implications to various degrees which are very different from those of fossil fuels. Internal combustion engines for some of these fuels are already in use and for rest under various stages of developments. Production, transportation and bunkering technologies are in various stages of technological and commercial readiness.

Key aspects that are to be taken into account while making a choice of a low / zero carbon fuel are (a) Feedstocks and energy sources, (b) Production technologies, (c) Onshore requirements, (d) Onboard requirements, (d) Regulations, standards and guidance, (e) Environmental impact, (f) Cost overview and (g) Barriers and risks.

Fuel Cells and hybrid propulsion machinery for vessels in near coastal trades are also in various stages of technological and commercial readiness levels.

The reality is that shipowners and other concerned stakeholders have limited mechanism at their disposal at present in determining the speed of shipping’s decarbonisation trajectory. Therefore, getting the commercial strategy right may be a case of choosing between the least possible unfavourable options when it comes to alternative fuels.

Most studies are showing that shipping being a hard

to abate sector fossil fuel will continue to be in use for certain percentage of global fleet around mid-century and beyond. Carbon capture for re-use or sequestration has been demonstrated on land-based applications and the transfer of those technologies onboard for maritime applications is being viewed as a viable way to remove CO2 emissions from the exhaust of fossil fuel burning equipment, and thus a means to reduce vessel-specific CO2 emissions. Tests and trials for the technology are under way globally with one known application on commercial vessels.

National Maritime Day is the most appropriate occasion for reviewing the status of all these changes taking place in global / national shipping industry and to find ways by which our nation can contribute to this transformation and derive benefit for its economy and society.

There is immense opportunity for India to develop some of the required technologies for not only domestic applications but also global market as well. Maritime India Vision 2030 of Ministry of Ports, Shipping and Waterways, Government of India has rightly identified creation of common platform for ancillaries (marine equipment) to develop and showcase the products available for Indian shipbuilding and global market. This objective needs to be pursued. Embracing new technologies and innovation will help in India’s quest to turn itself to Manufacturing economy.

Most leading economies are heavily investing in Research and Developments for all above mentioned technologies in their respective countries.

Governments are helping companies and research institutes transform R&D concepts to commercial products by Co-funding for example up to 50% of total direct R&D project costs (e.g.: equipment, material, professional services, intellectual property, ancillary cost, manpower costs to engage external research) since successful outcomes creates jobs and derive economic benefits for their respective societies.

There is a dire need for Government to invest in such R&D effort for national benefit.

- MMT

The Author Mr IN Bose Marine Engineer

Indian Seaborne

Trade and Investment In Shipping - with Focus on Dry Cargo

In 2022, India’s seaborne dry

Cargo – Bulk and

Break

bulk

Trade recorded about 470 MMT; Imports recorded about 322 MMT, Exports about 73 MMT; Coastal trade about 76MMT. Coastal trade has increased substantially over the years, exceeding Export Volumes.

Major commodities imported are coal, fertilizer

and raw/ semi/ finished goods related to energy, agriculture and construction sectors. These are essential and critical for the economy.

Major commodities exported are agri- products, minerals, steel etc which earn valuable foreign exchange for the country.

In addition, coal, iron ore and other agri and construction materials are transported along the coast which is vital for the economy.

India’s Dry Bulk ships dead weight tonnage Capacity continues to be around 6 Million, which is about 0.6% of the Global Capacity. Whilst, the share of cargo volume is about 7% of Global Exim trade Volume. More than 90% of Indian seaborne Dry Cargo Volume is dependent on foreign tonnage.The share of Indian Flag vessels-Imports is just 9 mmt out of 332 mmt – just abt 3% share. Exports is 1.0 mmt out of 72.8 mmt- just abt 1.4 % share Coastal is 34.0 mmt out of 75.7 mmt – abt 45% Indian Shipping seems to be surviving due to the cargo reservation and support offered through cabotage rules. Indian EXIM trade through Indian flag vessel is hardly 2.5% and is highly dependent on Foreign flag vessel which is not good and

conducive for India.Indian seaborne trade will be affected badly, in case , there are any sanctions and / or external aggression, affecting energy, agriculture and construction industries in India. It is recommended that min 50% of the seaborne trade is carried through Indian Flag or controlled tonnages. This needs huge financial investments in the shipping sector. Budgetary support in 202223 was a meagre – less than usd 100 million with very complicated rules . Investment planned for the Sagar mala project is USD 65 billion but there is hardly any allocation for ship acquisition.

Investment in Indian Shipping -

Currently, the total value of all ships across the globe is estimated to be about usd 900 billion to USD 1 trillion. India needs about USD 100 billion overall investment to meet its tonnage capacity, to transport her seaborne trade volumes on Indian flag vessels. But its investment is presently much less than USD 5 billion. Due to the high rate of Interest on borrowed capital, and low rate of returns, shipping has been a low priority segment for the investors in India.

Government allocates substantial funds for Highways, Railways, port Sector in every year’s budget but has totally neglected investments on ship tonnage acquisition and augmentation. Hence, India’s Seaborne Trade continues to be heavily dependent on foreign tonnage. Should anything go wrong in the support extended by foreign ship owners, India’s seaborne trade could be impacted badly, affecting seaborne trade and the economy.

Indian Stock Market is worth over USD 3 trillion. India’s annual budget is about USD 400 Billion per

annum. But, Shipping Industry has not been able to attract even USD 5 billion per annum from both the Government and Indian investors. This may be due to low and unreliable returns on Investment and poor image of the industry.

India needs min USD 5 billion per annum, low interest finance to improve capacity through budgetary support or through suitable financing methods , to be self reliant.. This investment is not high considering the current status of Indian Economy. Indian Shipping is Second line of defence India considers Shipping as second line of defence, as per one of the objectives of the Shipping Ministry. Trade and commerce is vital to the economy and needs Government’s and the industry’s attention to improve the share of trade through Indian Flag vessels, even during external aggression. Hence, suitable policy amendments and funding is essential before India’s seaborne trade is 100 % in the grip of foreign powers!

- MMT

The Author KC Shiva Manohar FICS, Shipping Consultant

Challenges

and

Opportunities: India’s

Role in the Surge of Ship Recycling

With over 15,000 ships and 600 million deadweight tonnes expected to be recycled between 2023 and 2032, there will be a substantial increase in demand for ship recycling services. This provides ship recyclers in India with a positive outlook for their business operations, as they will have ample opportunities to secure contracts and generate revenue.

However, it is crucial for ship recyclers in India to ensure that they adhere to the internationally recognized standards for safe and environmentally sound recycling practices. The ratification and implementation of the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships becomes even more critical for Indian ship recyclers.

Ship recyclers in India should also consider

investing in infrastructure and technology to meet the growing demand efficiently. This could include modernizing their facilities, improving waste management systems, and adopting greener practices to minimize the environmental impact of ship recycling operations.

Additionally, the surge in ship recycling may attract attention from international organizations and regulators, placing a greater emphasis on transparency, accountability, and environmental compliance. Ship recyclers in India should be prepared to demonstrate their commitment to meeting these requirements to attract clients who prioritize responsible and ethical ship recycling practices.

The news of the expected increase in ship recycling is a positive development for ship recyclers in India. It presents them with a lucrative business opportunity, but also requires a focus on compliance with international standards and environmental sustainability. By embracing these challenges and investing in responsible practices, ship recyclers in India can position themselves as leaders in the global ship recycling industry and contribute to a more sustainable maritime sector

- MMT

The projected surge in ship recycling presents significant implications and opportunities for ship recyclers in India. As one of the major ship recycling nations, India plays a significant role in the ship recycling industry. The news suggests that ship recyclers in India can expect a busy and prosperous period ahead.

The Author

Mr Rohith Agarwal CEO, Guideship Consulting Services Bhavnagar

Ship Funding in India

Ship funding in India, in historical perspective since independence, has always been in the domain of the public sector. The erstwhile ‘Shipping Development Fund’ created by the government of India in 1961 had mixed success

and had to be wound up with substantial losses in 1985. The creation of SCICI also could not have any significant impact on Indian shipping and the organization was merged with parent company ICICI 1996.

Post liberalization, the Indian banking industry was hampered by lack of domain knowledge because

commercial ship management skills did not develop in India due to high taxation and regulatory issues. Funding of ships was restricted to public sector companies or large well-established companies with strong balance sheets. Banks insisted ‘employment’ of the ships to cover any borrowings, which is not possible in international shipping markets. Lending by Indian banks has therefore been restricted to funding assets which is owned by companies with large balance sheet, with recourse on balance sheet and other non-asset guarantees. Some recent unfortunate incidents like Mercator shipping, ABG shipping, Bhatia shipping, caused primarily due to the volatile shipping markets which resulted from the credit boom/bust in 2009, further made lenders cautious. Lack of domain knowledge by banks and continued reluctance to consider asset-based financing for shipping makes ship funding from Indian sources difficult.

Foreign lenders have not been able to contribute to funding in India, though they have funded Indian companies who have set up subsidiaries abroad. This is primarily due to the lenders not being comfortable with Indian flag, as most large shipping banks and other lenders are comfortable with other foreign flags due to perceived speed of execution and service.

Other sources of funding like VC, AIF, bonds etc. remain muted in India, mostly due to lack of domain knowledge and perceived risks around the volatile and cyclical industry. With strong balance sheets, cash flows and asset base, only very large Indian shipping companies have been able to access global ship finance at internationally competitive rates.

One of the key reasons for Indian banks not being able to effectively fund shipping is the lack of expertise in the banking systems. Shipping finance requires specialist who understand the trade. It also requires a dedicated vertical within the bank, rather than a generalist ‘relationship Manager’ handling the opportunity based on client allocation. Restrictions on shipping industry and the consequent flight of capital and skills from India to overseas locations like Dubai and Singapore meant that Indian banks and lenders never received exposure to intermediate players like ship operators and commercial ship managers, which led to lack of skill development in the banking sector. The lack of funding further prevented the development of healthy shipping eco system within India.

Projects like GIFT IFSC, which provide for competitive tax and regulatory regime, hold great promise for bringing in global funding to India. India flag administration also needs to be made more attractive to global shipping companies, with Indian flag being the flag of choice rather than a flag required for ‘right of first refusal’ for Indian tendered cargoes and Indian coastal cargoes. Restrictions of flying foreign flag from India also need to be reviewed, as it acts a barrier for Indian shipping companies to access funds from lenders who are associated with a specific flag state. Most lenders are comfortable with flag state regime which they understand and endorse, as they are comfortable with the flag regime, and it allows them to control the funded asset in terms of re-possession in the event of default. Restricting the flag for India owned tonnage also severely restricts funding options, forcing capital to move out of India.

It is heartening to see banks already using the GIFT IFSC platforms for funding ships, with the international business units (IBUs) of the banks acting as ‘offshore lenders’ to the shipping industry. This structure has immense potential not only for funding Indian shipping, but also for allowing Indian banks to participate in global ship finance sector.

The ‘Maritime Development Fund (MDF), which has been a long-standing demand of the industry, can be structured as a commercial fund with mandate to participate not only in Indian shipping play, but also global opportunities. This exposure will provide much need experience and skills to Indian lenders.

With maturing equity and debt markets, large forex reserves and large expanding economy, India is well poised to provide funding to local and global shipping markets.

- MMT

The Author

Amit Oza Director, Astramar Shipping & Trading

Domestic steel prices to remain under pressure

Steel prices have been on a declining trend at the start of FY2024, as falling Chinese export offers pulled down domestic hot rolled coil (HRC) prices by 3.8% in the current quarter so far. Domestic rebar prices also witnessed a similar trend, correcting by a steeper 4.8% during the same period. According to ICRA’s latest research note on the steel sector, domestic steel demand remained resilient, growing by 7.2%

in April 2023 (in line with ICRA’s FY2024 full year growth forecast of 7-8%). Any meaningful price recovery looks unlikely in the near term, given the external headwinds. ICRA has therefore cut its baseline steel price forecasts for FY2024, with average domestic HRC prices being now expected to be lower by 4-5% yearon-year (YoY) in FY2024, against a marginal YoY rise of 1-2% expected earlier.

Commenting on the industry trends, Mr. Jayanta Roy, Senior Vice-President & Group Head, Corporate Sector Ratings, ICRA said: “CY2023 started on a positive note for the steel industry, as unlocking of the Chinese economy raised hopes for a meaningful recovery in steel demand in the world’s largest producing and consuming block. While pent-up demand initially helped pull Chinese HRC export offers to a 9-month high of US$ 695/MT by endMarch 2023, the demand momentum appears to have lost steam thereafter. This created a domestic oversupply, leading to the twin effects of Chinese HRC export offers sliding to US$ 550/MT at present, representing a sharp 21% correction in FY2024, and Chinese monthly steel exports reaching a two-year high of almost 8 million tonne (mt) in April 2023.”

Given these sharp corrections in Chinese HRC export offers, ICRA’s analysis suggests that domestic HRC prices are currently trading at a premium of US$ 50/MT over Chinese imports. While Japanese HRC export offers are prevailing higher at US$ 615/MT (against US$ 550/MT for Chinese offers), given its duty-free access to the Indian market, domestic HRC prices are also trading at a premium of US$ 25/MT over Japanese imports. This opens up the possibility of a steeper-than-expected rise in steel imports in FY2024, as trade flows get diverted to high-growth markets like India. Therefore, unless the domestic premium reduces meaningfully from the prevailing highs, steel imports to India could climb by as much as 30-40% YoY in FY2024, which can potentially make India a net steel importer in FY2024 after a gap of five years.

Steelmakers are however expected to get relief from a moderation in input costs in FY2024. The spot price of seaborne prime hard coking coal offers from Australia, which accounts for around 40% of the overall steelmaking cost for a blast furnace operator, is expected to average at US$ 255-260/ MT in FY2024, lower by 20-25% over FY2023 levels on account of improving supplies from Australia. Thermal coal prices also moderated, with domestic e-auction premium from Coal India falling to 137% in April 2023 (against an average of 265% in FY2023), and RB1 grade imported thermal coal spot prices currently trading at a much lower level of US$ 111/MT (against an average of US$ 253/ MT in FY2023). Apart from coal, input cost relief is also expected from the correction in domestic iron

ore prices, which are expected to trend lower by 5-6% YoY in FY2024 amidst a softening in seaborne iron ore prices. Therefore, the moderation in input costs is expected to partly cushion the impact of steel price corrections seen in the current fiscal so far, helping keep industry operating profit margins at 12-13% in FY2024, in line with FY2023 levels. Commenting on this trend, Mr. Roy added: “While these subdued margin levels were last witnessed during the downcycle years of FY2017, what has given the industry more resilience to withstand further downturns is the aggressive deleveraging during the last upcycle of FY2021/ FY2022. This has brought down the industry’s bank borrowings to US$ 178/MT of installed capacity in March 2023, representing a decline of 52% over March 2017, when it stood much higher at US$ 371/MT”.

Fresh steel capacities accumulating to ~36 million tonne per annum are lined up for commissioning by FY2026. Notwithstanding these upcoming capacities, the Government’s capex drive, and resultant push to domestic steel consumption, are expected to keep the industry’s capacity utilisation rate at around 80% in FY2024. That said, with the industry’s earnings moderating from the high watermark of FY2022, dependence on external financing to meet committed expansion plans is likely to increase going forward, early signs of which can be observed in the 22% increase in the steel industry’s bank borrowings during FY2023. Consequently, the industry’s leverage (total debt to operating profits) is expected to deteriorate to an estimated 2.5-3.0 times in FY2023E/ FY2024P as against 1.1 times in FY2022. However, with the industry’s EBITDA /MT being expected to average at ~US$ 110-115/MT in FY2024 (within the range of US$ 100-150/MT for a Stable outlook), the sector’s outlook has been retained as Stable by ICRA.

Agencies

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