Great Eastern back to buying ships

The company Plans to use Rs 3,000-crore cash reserve for acquiring assets.

Great Eastern (GE) Shipping, India’s largest private sector shipping company, once again plans to acquire ships. This, after selling no less than 15 ships, as well as cancelling orders for three new ships in the last 18 months.

Prices for very large crude carriers (VLCCs) and capesize bulk carriers have already dropped by 30 per cent to $100 million (about Rs 460 crore) and by 40 per cent to $56 million (about Rs 250 crore) respectively, in the last two years. The correction in prices for five-year-old ships have been much sharper at 40 per cent to $80 million (about Rs 370 crore) and by 63 per cent $55 million (about Rs 250 crore), respectively, in the same period.

“With the overhang of new deliveries from yards this year, we expect one more round of correction in asset prices,” said a company executive on condition of anonymity.

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According to an estimate provided by the company in 2010, new ships that will form 24.6 per cent of the world’s present capacity for dry bulk carriers is due for delivery from yards. This is going to put pressure on assets’ prices in both the second-hand market as well as the primary market, as some orders for new ships may be cancelled by buyers. Similarly, 13 per cent of the present fleet for crude tankers and 11.6 per cent of the present capacity of product tankers are due for delivery this year.

GE Shipping has a fleet of 37 vessels at present, down from a peak of 49 about 18 months ago. These 37 vessels include four new long-range product tankers that joined the fleet between October 2008, and May 2009. The company’s present order book consists of seven vessels - five dry bulk carriers and two Suezmax tankers - to be delivered in 2011 and 2012.

The stock of the company gained 6.6 per cent at Rs 322.3 a share at close of Monday’s trade on the Bombay Stock Exchange (BSE). Sensex, the BSE’s benchmark index, lost 0.08 per cent to settle at 17,526.71.