Sucheta Dalal :Mercator to expand in dredging bulk and tanker segments
Sucheta Dalal

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Mercator to expand in dredging, bulk and tanker segments   

March 11, 2010

Seaborne transportation service provider Mercator Lines Ltd, which has diversified into various segments apart from being a core shipping company, plans to expand in the dredging, bulk and tanker segments in the next twelve to eighteen months. Expansion in its coalmining capacity is also on the cards.


“We are trying to increase our presence in the other industries, the idea is in the next three to four years, our income from the other segments should be more than the shipping segment. But the shipping segment is also increasing. It will also depend on the kind of contracts that we sign. If contracts increase, our investments will also increase,” said HK Mittal, executive chairman, Mercator Lines.


However, at the moment, the company does not plan to infuse any fresh equity or explore other fund-raising options, he added.


The shipping company has taken delivery of two tankers on Wednesday and another bulk carrier is likely to join the fleet soon. Going ahead, it plans to add four to five ships each in both the bulk and tanker segments.


“We have 14 bulk carriers and eight tankers at the moment. I think we will increase the number of tankers to 12–13. Overall, we will add up to five to six vessels in both these segments in the next 12 to 18 months,” a company official said, preferring anonymity.


“The year 2009-2010 is definitely low for all shipping companies; 2010-2011 would be slightly better. The dry cargo (bulk) business has increased a little, but the tanker segment seems to be depressed at least for the next year. The rates in the bulk segment have returned to normal. The shipping segment will take time to recover,” Mr Mittal said.


Commenting on the fall in asset prices of vessels, he said, “I think the prices have bottomed out, and in my opinion, prices should not fall further. Assets are being sold below manufacturing cost. Chinese, European and Korean companies get subsidies from their respective governments, which are passed on to buyers. If at all, these governments withdraw subsidies, prices may go up.”


Mercator is in the process of phasing out four single-hull vessels ahead of the implementation of the International Maritime Organisation (IMO) guidelines on phasing out of such vessels and is confident that it will complete the process before April 2010. “We will be the one of the few shipping companies with a complete double-hull fleet in India by 1 April 2010,” the company official said.


On the issue of capital gains from the scrapping of single-hull vessels, Mr Mittal said, “Scrap prices are good at present, as steel prices are high. Anyway, for our company, the acquisition cost for these ships was quite low.”


In the dredging segment, the company is looking at expanding to eight dredgers in the next 12 to 18 months. “We do not basically work upon a concrete plan, we are always , but ideally we should have seven or eight dredgers in the next 12 to 18 months, but they (the numbers) could vary,” the company official said.


“We are planning to expand in the dredging segment. The potential in the dredging segment is quite large. With port capacity expanding, the dredging market available in India also expands automatically. At present, a major amount of dredging work is done by foreign companies. Indian companies have a negligible presence in this segment. Thus, the potential is absolutely big in this segment,” added Mr Mittal.


Apart from the expansion planned in its core shipping segment, the company is also focused on opportunities in coal mining. The company at present undertakes mining activities in Indonesia and exports around 3.5 million tonnes (MT) of coal to India. It is also aggressively looking for another mine in Indonesia.


“We wish to increase our current coal capacity of 3.5MT to a minimum of 10MT in the next two years,” said Mr Mittal.


“The demand for coal from India and China is huge and the sale of coal is not a problem. The sale price of the coal depends on the price of the power that is generated. The scope of selling power is not an issue, the issue is the availability,” he added. — Amritha Pillay

-- Sucheta Dalal