MUMBAI: Container ship operator Shreyas Shipping and Logistics Ltd is venturing into the dry bulk segment by winning a deal from state-run steel maker Rashtriya Ispat Nigam Ltd (RINL) for transporting products from its plant at Visakhapatnam to stockyards in Ahmedabad, Mumbai and Kochi.
Mumbai-listed Shreyas, the Indian ship-owning unit of Dubai-based Transworld Group, has purchased a foreign-flagged multi-purpose vessel to haul 225,000 tonnes a year to the three destinations on an annual contract worth about ₹75 crore, a company official said. The ship will be converted into an Indian flag because transporting cargo on local routes along the coast is reserved for Indian registered ships, according to local rules.
Of the total quantity to be shipped, 60,000 tonnes is meant for Kochi, 75,000 tonnes for Mumbai and 90,000 tonnes for Ahmedabad.
Reduce logistics costs
Shreyas will add one more dry bulk ship to its fleet to execute the contract, the first to be tried by a state-run steel maker as the Shipping Ministry aggressively pushes coastal shipping to reduce logistics costs.
“RINL has issued a letter of intent to Shreyas after it emerged the successful bidder in a tender,” the company official mentioned earlier said. “Shreyas had earlier moved steel products for Jindal Steel on its container ships, but we are now moving full-fledged into the dry bulk space,” the official said.
Shreyas currently runs a fleet of 11 small-sized container ships.
The contract involves road movement for the first and last mile connectivity for which Shreyas has tied-up with local transporters at both ends. RINL has moved its products by road and rail thus far.
Logistics cost contributes around 15 per cent to the total landed cost of steel. One reason for the high logistics cost has been the underutilisation of water mode — both ocean and inland waterways — for shipments. The water mode contributes only 1 per cent of logistics in India (compared to 24 per cent in China), even though it offers environmental benefits and savings in fuel costs. Steel demand in India, the world’s third biggest producer of crude steel, is projected to touch 200 million tonnes per annum (MTPA) by 2025 under base case scenario of GDP growing at 7-8 per cent per annum. “Logistics efficiency will be critical for making existing capacity more competitive,” according to the Sagarmala programme of the Central government.
The Sagarmala estimates a potential for moving 7-8 MMTPA of steel through coastal route by 2020, and 12-14 MMTPA by 2025. Moving steel products by the coastal route could save as much as ₹1.3 per tonne-km. This translates into savings of ₹1,000-1,200 crore per annum by 2025, the Shipping Ministry said in the Sagarmala plan.