Ship operating costs rise on higher R&M and insurance spend

LONDON: Underlying vessel operating cost inflation accelerated moderately in 2019 on higher repair & maintenance and insurance spend, while looking ahead costs are expected to continue rising at a similar pace in 2020 on a hardening insurance market before receding in subsequent years, according to the latest Ship Operating Costs Annual Review and Forecast 2019/20 report published by global shipping consultancy Drewry.

Costs rose for a third consecutive year following marked declines in the capacity ravaged years of 2015-16.

Opex costs are heavily linked to developments in the wider shipping market as some, such as insurance, are connected to asset values and others impacted by the ability of shipowners to pay.

Drewry estimates that average daily operating costs across the 46 different ship types and sizes covered in this report increased 2.2% in 2019, compared to underlying increases of 1.1% and 0.7% respectively in the previous two years. This followed a period in which opex spending contracted over two consecutive years by almost 9% in 2015-16 (see chart).

Spend rose across all six of the main opex cost heads for the second consecutive year in 2019, indicating how broad based inflation continues to be.

“While cost pressures remain, this trend confirms the end of the deflationary era that prevailed mid-decade, as the depressed state of shipping markets forced operators to slash costs in order to survive,” said Drewry’s Director of research products Martin Dixon. “There are limits to cost cutting, beyond which the safety of the vessel and crew are put at risk, and as freight markets have recovered so pressure to reduce spend has lifted leading to modest acceleration in cost inflation.”

Manning costs rose for a second successive year, up 1.3% in 2019, despite the easing officer shortage, while insurance costs increased 3.4% having flatlined the previous year. Spend on stores, spares and lubricants rose for the third year in succession, though with the exception of lubes cost inflation remains very moderate.

But expenditure on repair and maintenance and dry docking accelerated to 3.1% in 2019 on tighter repair yard capacity as a result of a spike in retrofit activity, while costs relating to management and administration increased just 1%.

The rise in costs was broad-based across all the main cargo carrying sectors for the second consecutive year, as continued recovery across most cargo shipping markets and rising regulatory compliance requirements lifted cost inflation. The latest assessments include vessels in the container, chemical, dry bulk, oil tanker, LNG, LPG, general cargo, reefer, roro and car carriers sectors. But market conditions are expected to be challenging for many shipowners as the trade outlook remains uncertain and benign capacity conditions prove temporary when the current round of retrofits recedes.

“Hence, we expect the pressure on costs to remain which will dampen any likely inflation, particularly in areas where owners have greater control, such as manning, stores, spares and management and administration,” added Dixon. “Other cost heads, beyond the direct control of shipowners, will prove tougher to manage, particularly insurance where we expect costs to rise sharply in 2020. Continued attempts to clean up and decarbonise shipping will add to owner cost burdens, affecting management & administration, repair and maintenance and dry docking costs in particular, as retrofitted equipment adds to maintenance costs.”

However, any such increases will remain below the prevailing level of general price inflation and so represent cost stagnation in real terms.

Import curbs likely on over 350 items to boost ‘Make in India’

NEW DELHI: The Government has identified over 350 “non-essential” imports — ranging from toys and textile products to footwear and electronic goods — on which it intends to initiate a host of measures, including an increase in customs duty apart from putting in place quality control orders to reduce shipments into the Country and encourage domestic manufacturing.

In addition, Departments are looking into suggestions of waiving the requirement for global tender for Government procurement in sectors where it thinks there is sufficient domestic capacity to execute a contract, sources said recently. Several Ministries such as Textiles, Electronics and IT and Commerce and industry have been asked to initiate action on the identified list of products.

As part of the initiative, public sector companies may also be asked to list out their requirement for products and specifications for the next five-six years so that domestic industry knows the demand and plan accordingly. So, if the standard changes, Indian manufacturers can tweak their production accordingly, explained an Officer.

The moves are part of the Government’s thrust to ‘Make-in-India’ scheme, for which it has been working on ways to discourage imports.

So far it has largely depended on an increase in import duty for a host of products, including television sets and mobile phones, which the Government believes, has helped push domestic manufacturing. Ministers have repeatedly pointed to the domestic production and assembly of mobile handsets in recent years as a result of this policy. Similarly, it has restricted the import of raw material for agarbattis, although a section of the domestic industry is unhappy with the decision.

Going forward, the Government intends to pursue the plan vigorously and first up will be a quality control order for toys, such as dolls. Some of the duty hikes are expected to be announced in the budget, although officials are not ruling out midterm correction.

Govt blocks GST e-way bill generation; move may impact 300,000 firms

NEW DELHI: Businesses of roughly 300,000 firms paying goods and services tax (GST) were likely impacted on Monday, 3rd November, as the Government had blocked e-way bill generation for non-compliant assessees.
These businesses had not filed their monthly GST Return (GSTR)-3B for two consecutive months. The Government had notified the rule last month as an enforcement measure amid subdued revenue collection.
The GST system has been grappling with low levels of compliance.
Only 65-68 per cent of eligible GST filers file the GSTR-3B within the due date, the GST Network (GSTN) data shows.
“This month, the taxpayer will be alerted with a cautionary message while generating e-way bills, in case GSTR-3B for the past two successive months of the consignor/consignee GST identification number (GSTIN) has not been filed. From next month onwards, such GSTINs will be blocked,” the note had said.
The same has become operational from December 3.
The e-way bill facility will get unblocked within three hours of payment of dues and filing returns.

Warehousing sector gets investment of Rs 25,000 cr since 2017; figure may touch Rs 49,500 cr by 2021

MUMBAI: The country's warehousing sector has attracted an investment of Rs 25,400 crore since 2017 and the inflow is likely to reach Rs 49,500 crore by 2021 on robust demand for logistics space by e-commerce companies, according to global property consultant Colliers.

The industrial and warehousing sector in India has attracted significant investor interest since 2017 led by robust demand from e-commerce and other consumer-led occupiers, it said.

"The sector has attracted interest from multiple large institutional investors since 2017, with investment inflows of Rs 254 billion (USD 3.6 billion), signifying a large pool of capital available for investment in this sector. We project the investment inflow is likely to touch Rs 495 billion (USD 7 billion) by 2021 as existing participants expand their portfolio and new players enter the market," the consultant said. Colliers noted that this sector in the past has been characterised by fragmented sheds and godowns but now, it is becoming organised because of demand for larger facilities from e-commerce companies.

"Occupiers mulling large contiguous warehouse leases, especially in the e-commerce and 3PL (third-party logistics) sectors, should look at select micromarkets in Mumbai and Pune that offer a good mix of industrial and multi-purpose warehouses. "Bengaluru should also be explored as it offers seamless transfer of goods between States, benefitting from the removal of State-level taxes," said Colliers International India Managing Director and Chairman Sankey Prasad.

On factors driving industrial and warehousing demand, Colliers said the sector is benefiting from Government policy initiatives such as the goods and services tax (GST) implementation and the Make in India programme, as well as global trade dynamics and evolving consumption patterns.

 

eeping Supply Chains safe from illicit trade

GENEVA/NEW YORK: Global trade allows countries to expand their markets across national borders which bring a great choice and availability of containerized goods to consumers around the world, from the clothes we wear, to the medicines and fresh produce we rely on to stay well.

However, the expansion of trade also opens opportunities to the criminals on the fringes of society, who will always search for any means possible to move illegal and unethical goods everywhere.

In a rare appearance by a container shipping executive talking about the problems of illicit trade, Fabio Santucci, President of MSC Mediterranean Shipping Company in the USA, explained to the World Trade Symposium in New York some of the measures that MSC, a world leader in transportation and logistics, implements to try to curb illicit trade.

Speaking to Chris Clague, who oversees the Global Illicit Trade Index for The Economist Intelligence Unit, Fabio pointed out that Governments in charge of curbing the trade of counterfeit goods, weapons, drugs, ivory and other illicit goods cannot do it alone. Therefore, he called for greater collaboration and cooperating across the industry and between the private and public sectors.

Measures for the safety and security of containers Illicit trade damages the global economy and harms public health worldwide. As people continue to buy arms, drugs, animal hunting trophies and other illicit goods on the black markets, securing global supply chains remains of paramount importance.

“MSC is a responsible company and we implement a variety of measures to ensure the safety and security of our containers and our customers’ cargo within them,” Fabio told an audience from business, public policy and academia.

“To keep the supply chain safe, everybody has to participate and be actively involved” Fabio said.

Fabio referred to MSC’s know-your-customer (KYC) and cargo booking screening protocols, which help minimise the risk of undeclared or misdeclared cargo entering the supply chain. He added that a range of physical security measures such as guards, sniffer dogs and even divers are deployed at the company’s own expense in the most sensitive regions where the risk from organized crime is most prominent.

Maintaining a culture in which crew and staff ashore feel comfortable and incentivized to report suspicious activities is also a key part of MSC’s approach.

Looking to the future, Fabio highlighted MSC’s advocacy for the smart containerization of the shipping and logistics sector and the company’s efforts to propose container tracking and monitoring solutions which are becoming more popular with shippers and policy makers alike. "A simple feature, such as a monitoring device, connected to the internet, which sends an alert when a container door is unexpectedly opened, could go a long way to enhancing container security." Fabio said.

However, everyone involved in the sector needs to take an interest in the many advantages from smart containers in order to make this technology a reality. “It is crucially important that the cargo owners who are our customers understand these solutions and that everyone in the sector comes to the table to appreciate the merits and advantages of greater visibility of cargo flow and the enhanced security that smart containers can bring to global trade,” he said.

Fabio also pointed out MSC’s pioneering role as a Co-Founder of the Digital Container Shipping Industry, which is seeking to establish digital industry standards to ease the flow of information around the sector and facilitate the uptake of IoT-enabled (Internet of Things) solutions such as smart containers, as well as the company’s participation in projects to make shipping data exchange more efficient and more secure using blockchain technologies, said a MSC release.

Unifeeder acquires the Feedertech Group

AARHUS N: Unifeeder has acquired a 77% stake in The Feedertech Group, a Singapore-based feeder and shortsea operator. The Group’s Chairman, Ali Maghami, will retain the remaining 23% shareholding.

Established in 2003, the Group operates two companies; Feedertech, which is a feedering service and Perma, a regional shortsea network. Both operate in the same market and connect the fast-growing trade route of Asia-Middle East via the Indian Subcontinent. The Group generates annual revenue of close to $200m from a diversified customer mix, calls at 50 ports and transports over 600k TEU annually.

 “The Feedertech Group has enjoyed great success over the years and we are proud of our achievements.

We believe the transaction with Unifeeder, and the support of DP World, will allow us to take the business to the next stage of its growth. Both Feedertech and Unifeeder share similar business models and a desire to reduce inefficiencies, and by combining the expertise of the two entities, we believe we can deliver a high-quality product for our customers. Furthermore, being part of the

DP World family will allow us to benefit from their deep relationship with end-customers and a wide global network. We look forward to a prosperous future together,’’ says Ali Maghami.

Through Feedertech and Perma, Unifeeder will now have the capability to offer feedering and regional shortsea connectivity in Europe, the Mediterranean, North Africa, Asia, the Middle East, and the Indian Subcontinent. Moreover, the expansion will increase Unifeeder’s logistics capabilities and facilitate integrated services that engage end-customers and traders in line with the strategic ambition of the company’s parent, the DP World Group. It also enables opportunities in the fast-growing coastal shortsea trade on the Indian Subcontinent, complementing the existing India logistics strategy of DP World.

This is yet another strategic step in our vision to build a global presence, offer a broader network of solutions to customers and leverage the way we engage with them to create the most comprehensive and integrated solutions across multiple geographies. We are excited to be joining forces with a company that operates on the same values as us. Feedertech’s asset-light business model and approach to preserve the common-user independent platform that focuses on flexibility, reliability and providing sustainable logistics solutions, made it a clear fit for Unifeeder,’’ says Jesper Kristensen, CEO of Unifeeder.

The deal is expected to close year end.

Commerce Minister highlights initiatives of Export Development Fund to boost exports

NEW DELHI: The Minister of Commerce and Industry, Piyush Goyal, has informed the Parliament that India’s overall exports (merchandise and services) has increased from USD 498.63 billion in 2017-18 to USD 538.07 billion in 2018-19, registering a positive growth of 7.91% as compared to the previous year. India’s exports have also increased from USD 262.14 billion in 2018-19 (Apr-Sept) to USD 266.63 billion in 2019-20 (Apr-Sept), showing a positive growth of 1.71% during current year.

 

There exists Export Development Fund (EDF) in Export-Import Bank of India under the provisions of the Export-Import Bank of India Act, 1981.

 

Government has taken following steps to increase exports and thereby earn foreign exchange for the Country:

I. A new Foreign Trade Policy (FTP) 2015-20 was launched on 1st April 2015. The policy, rationalised the earlier export promotion schemes and introduced two new schemes, namely Merchandise Exports from India Scheme (MEIS) for improving export of goods and Services Exports from India Scheme (SEIS) for increasing exports of services. Duty credit scrips issued under these schemes are fully transferable.

ii. The Mid-term Review of the FTP 2015-20 was undertaken on 5th December, 2017. Incentive rates for labour intensive/MSME sectors were increased by 2% with a financial implication of Rs 8,450 crore per year.

iii. A new Logistics Division was created in the Department of Commerce to coordinate integrated development of the logistics sector. India’s rank in World Bank’s Logistics Performance Index moved up from 54 in 2014 to 44 in 2018.

iv. Interest Equalization Scheme on pre and post shipment rupee export credit was introduced from 1.4.2015 providing interest equalization at 3% for labour intensive/ MSME sectors. The rate was increased to 5% for MSME sectors with effect from 2.11.2018 and merchant exporters were covered under the scheme with effect from 2.1.2019.

v. Various measures for improving Ease of Doing Business were taken. India’s rank in World Bank Ease of 

Doing Business ranking improved from 142 in 2014 to 63 in 2019 with the rank in trading across borders moving up from 122 to 80.

vi. A new scheme -Trade Infrastructure for Export Scheme (TIES) - was launched with effect from 1st April 2017 to address the export infrastructure gaps in the Country.

vii. A comprehensive Agriculture Export Policy was launched on 6th December, 2018 with an aim to double farmers’ income by 2022 and provides an impetus to agricultural exports.

viii. Transport and Marketing Assistance (TMA) scheme has been launched for mitigating disadvantage of higher cost of transportation for export of specified agriculture products.  

ix. A scheme for Rebate of State and Central Taxes and Levies (RoSCTL) covering export of garments and made-ups was notified on 7.3.2019 providing refund of duties/taxes at higher rates.