E-selling of ships yet to gain pace

Indian ship owners still prefer established international names like Clarksons, Simpson Spence Young

Cargo vessels might be sold online today, but the Indian shipping industry has not yet warmed up to the practice and still prefers traditional methods.

"A lot of them have not matured. A broker gives lot more information and a view on the market," Anil Devli, chief executive officer, Indian national shipowners association told Business Standard.

Online sale of cargo vessels has been made possible because of online assistance made available to assess the value of the ship and reach out to buyers. In recent times, websites like VesselsValue have gained a market share in providing these services. But, Indian ship owners still prefer to go to established international names like Clarksons, Simpson Spence Young Global, Jefferson etc. "That is not to say Indian brokerage companies are not competitive. But there is a widely-held perception among Indian ship owners about Indian brokers, in turn, engaging foreign brokers. So, as a seller, one doesn't want to have such an indirect deal," Devli added.

In the boom years of 2006-2007, when shipping companies were busy placing new building orders, companies weren't really bothered about second-hand sales.

But, reeling under oversupply, ship owners are now seeing more value than ever in the second-hand market. Currently, a five-year-old container vessel of 300,000 dead weight tonnage is available for $80 million as against $108 million in 2010.

Some are selling because they don't have the finances to hold on to their assets or due to lack of trade. Many companies feel this is a good time to acquire vessels, since the prices are almost 50 per cent lower compared to the peak time of 2010.

The Indian shipping industry has come a long way from the dark and dreary days, when to sell their own asset, permission had to be taken from the ship appraisal and licensing committee, which was a long and tardy process.

The government body would meet just once in a month and any company wanting to sell or buy a vessel internationally, had to get the proposal passed by the committee members.

It was done away with post liberalisation and a direct permission from the Reserve Bank of India started to be taken.

"Ships are always sold on contrarian view. Because one party thinks the markets would become better and the other thinks it will tank. It used to be very difficult to explain this to government officials who would deliberate on each deal for months and no one waited that long ," a senior shipping company executive said.

Once a company decides it wants to rent or sell the vessel for further trade or scrapping, the first step is valuation. Thereafter, the buyer can get third party inspection of the vessel done, which includes engineers who examine the upkeep of the vessel, the dry dock requirements (repair). Since a ship is a mobile asset, the date and area of delivery is a factor in the cost.

If a ship is being delivered at a place where there is no cargo, then the cost would go down. After the ship changes hands, the old crew is repatriated and the new flag (if it is sold to another country) takes over.

NOT SAILING THROUGH
|Although, online sale of cargo vehicles is possible, Indian shipping industry is yet to warm up to it
|Indian ship owners still prefer to go to established international names
|Reeling under oversupply, ship owners are seeing more value than ever in the second-hand market
|A ship being a mobile asset, the date and area of delivery are taken as factors in the cost
| If a ship is being delivered at a place where there is no cargo, then the cost would go down