Steel Authority of India Ltd through a joint venture with Shipping
Corporation of India may own a few bulk carriers to have continuous
availability of vessels, according to S K Roongta, Chairman, SAIL.
"By having our own vessels, we will also have security in case of
extreme situations and non-availability of vessels in the market," he
told journalists of The Hindu group of publications. Own vessels will
also act as a hedge. If the freight comes down, there is advantage of
lower freight. If the freight goes up, the company will make money
through its own ships.
In 2007-08, SAIL imported nearly 10 million tonnes of cargo,
especially coking coal, from countries such as Australia, China,
Russia and Egypt, and will continue to be a large importer in future.
For SAIL, the total logistics cost is around 10 per cent of its
revenues, which were Rs 45,555 crore in 2007-08, he said.
Ocean freight
Roongta said ocean freight has gone up tremendously in the last three
years. The Baltic Exchange Dry Index, an index covering dry bulk
shipping rates, used to be about 2000 two years ago, but is 10,000
plus now.
A couple of years ago, SAIL used to import coal from Australia at a
lower side of $15-16 a tonne and at $20-22 a tonne on the higher side.
Last year, on the higher side it was $80 a tonne, and today it is
hovering at $65-70 a tonne.
The steep increase in ocean freight was mainly due to rise in crude
oil prices and consequently led to higher bunker oil prices.
But, ultimately it is demand from countries like China for dry bulk
vessels that drives the ocean freight. It is believed that by 2009
there will be substantial addition in dry bulk carriers, he said.
Backward integration
On steel companies moving into backward integration, Roongta said this
is a global practice.
Most steel companies are trying to have control on their inputs. For
instance, Arcelor-Mittal plans to increase its captive resources, and
other companies also plan to do this.
While admitting that owning ships was a little "way off" in backward
integration, Roongta said that steel companies desired to have some
control over any major component of costs.
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