Environmental norms by the International Maritime Organization along with OPEC’s oil supply cuts further increased costs for shipping companies.
By Anubhav Mukherjee
Margins of top Indian shipping companies plummeted in the July-September quarter due to a sharp decline in global demand.
The Great Eastern Shipping Company, the largest in India by market capitalisation, reported a 23% fall in net profit for the second quarter, and the Shipping Corporation of India’s profits fell by 43%. Smaller companies like Seamec and Shreyas Shipping and Logistics reported net losses in the second quarter.
This year, cargo traffic handled at major ports in India was down by 10% to 646.1 metric tonnes compared to the previous year, according to the India Brand Equity Foundation.
In August, the demand for the maritime industry fell further as India’s exports dipped by 4% to Rs.5.06 lakh crore from Rs.5.22 lakh crore in August 2022. This assumes importance because the shipping industry transports 95% of India’s total exported goods.
The industry was already dealing with increased costs due to the new environmental regulations set by the International Maritime Organization (IMO) in January this year.
IMO has introduced two indices – Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII) – to measure the energy efficiency of the ships and collect data for their carbon intensity indicators.
To comply with IMO emission norms, the government is pushing Indian ship owners to shift to greener vessels, said Vijay Arora, managing director, of the Indian Register of Shipping.
The regulation also mandates that ship owners reduce their speed as sailing at a higher speed emits more pollutants, said Arora.
“Container ships used to travel at a very high speed, between 25 to 28 knots. Now they are not running at those speeds because of the regulations,” said Arora.
To add to the woes of the maritime industry, supply cuts by the Organization of Petroleum Exporting Countries (OPEC) this year weakened demand for oil-carrying tanker ships, said G. Shivakumar, chief financial officer, at The Great Eastern Shipping Company. A decrease in oil supply has further cut tanker rates, he said.
Diminishing world trade has also contributed to the slowdown in demand, said Kavita Mehra, key accounts manager, South Asia, APL Logistics. If the industry does not show improvement by 2024, it will face a further slowdown.