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SCI postpones fleet expansion

Mumbai: Shipping Corporation of India has deferred plans to buy eight vessels - including four very large crude carriers (VLCC) - in this financial year as it waits for freight demand to pickup and ship prices to decline further, writes Dow Jones Newswires.

"Looking at the current market conditions, we are not exercising the order for four very large crude carriers in this financial year," K.S Nair, director at the state-run company's bulk carrier and tanker division, told DJN.

The slowing global economy has hit world trade, sharply contracting freight rates. This has also led to reduced demand for ships.

Global tanker rates have declined 30% since the last financial year, Nair said. He said the cost per VLCC has declined to $120m from $160m last year.

"We are waiting for the rates to fall further," he said. "We may cancel these bids and invite fresh tenders."

The nation's biggest shipping company by fleet is also deferring an order to buy four capesize bulk carriers - which are of about 170,000 dead weight tons, or DWT - in the fiscal year that began April 1.

He didn't disclose the cost for purchasing the bulk carriers but cited the decline in their prices as the reason for the deferment.

The company had floated tenders for the eight ships last year and received responses from several shipbuilders. It is yet to shortlist the bidders, Nair said.

It had planned to finance as much as 80% of the cost through borrowings and the remainder from its cash flow, he said.

Shipping Corp. has a fleet of 78 vessels and accounts for a third of the total tonnage carried by India's shipping companies.

It also manages 58 ships for state-run organizations such as the Geological Survey of India, Oil & Natural Gas Corp. and the National Institute of Ocean Technology.

Shipping Corp. has ordered 31 ships since 2006 for a total of 75 billion rupees ($1.54 billion) Nair said, adding, the ships are due for delivery until 2012.

Nair said the company will take delivery of a VLCC worth $129 million this month and two MR product tankers - which are of 45,000 DWT - worth $45 million each in October and December.  [22/06/09]

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