India's Aging Fleet Offers $3.3 Billion Opportunity to Shipbuilding Industry

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The Associated Chambers of Commerce and Industry of India (ASSOCHAM) reports that more than 41% of the country's ship fleet is at least 20 years old. The aging fleet holds tremendous growth potential for the shipbuilding and ship repair industry, with opportunities of more than $3.3 billion.

According to ASSOCHAM's analysis, "Indian Shipping Fleet: Size, Capacity and Age Composition," ships older than 20 years require more frequent and extensive repair and maintenance, which augurs well for the Indian shipbuilding industry. However, "domestic shipbuilders must invest extensively in their capacities, to take advantage in this regard," according to the report.

The majority of Indian ships are less competitive, since vessels that are less than 15 years old are preferred in international trade, said D.S. Rawat, the secretary general of ASSOCHAM. "The government needs to act as a facilitator and create opportunities for a healthy business climate to attract fresh investments in the shipping sector."

The analysis reported that India has a total of 1,122 shipping vessels in its fleet, and 466 (41%) are at least 20 years old. Considering the average life of a shipping vessel is about 26 years, most of the existing Indian vessels need to be replaced.

A replacement rate of 7% for the older vessels would translate into 33 ships. The average cost of constructing a large vessel is about $100 million, which translates into a $3.3 billion opportunity.

Rawat said that domestic shipbuilders need to invest in capacity enhancement, or shipbuilders from other countries will cash in on this opportunity.

The analysis reported that more than 23% of India's total shipping vessel fleet (264 vessels) is under the age group of five years. About 141 vessels are in the age group 16 to 20 years; 135 vessels are in the 11- to 15-year-old group; and 116 vessels in the six- to 10-year-old group.

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