Ship-Lift – A Revolution in shipbuilding

Blogger - Ashish Raj

From the time Noah built the ark, the shipwrights have not had much chance for innovation. The archaeological findings from Egypt show 75 feet long vessel hulls being built in pits (dry-docks for modern man) as early as 3000 BC. Even the floating dry-docks (tidal docks) were built in 2500 BC by none other than Indians.

The Harrappan civilization used shipbuilding as a strategic industry by building boats for foreigners (like flotillas for Alexander the great) and exporting teak for shipbuilding to Persia as well. Since then, there have been numerous changes in the type and style of vessels but the basic shipbuilding process has remained the same. We still dig pits, build the vessels therein and flood them out to sea.

Rolls Royce has suddenly changed the entire commercial ship-building landscape with its new ship-lift and transfer system. The shiplift is designed on the basic principle that a vessel requires floating only for a few hours after the months of building that goes into it. Using the shiplift and transfer system, the vessels are built on the numerous building berths and then floated out to the wet dock using the ship lift. The shiplift literally lowers the vessel into the sea via a lift run by hoists (ref the drawing below).

Some of the obvious benefits of shiplift include reduction in dry-docking time, multiple ship buildings with same initial capex, ultra easy capacity enhancement and even distribution of load on the building berth resulting in large savings in civil construction costs.

Though the concept has been here for some time, we have just started seeing it being developed for large and ultra large commercial vessels. If Indian shipwrights start looking at it seriously, it just might give them the extra advantage vis-à-vis the old Korean and Chinese yards and tilt the balance in their favor.

A Dedicated Shipping Index - Curtain Raiser

Blogger - Prasenjit Gangopadhyay

In the ‘India Inc Investing: a mid-year report 2008’ released by the Assocham in mid September; ports and shipping industry sectors were found to be among the most unattractive for Indian investors. It was found that FDI and PE inflows into these sectors as well as retail and FII trade volumes in the stocks were remarkably low. The reason identified were the usual policy and taxation issues, volatility etc. However, industry leaders, including INSA, were of the opinion that having a separate shipping index on the key bourses was likely to increase investor interest in stocks. This could also lead to more visibility and therefore help in attracting investments.

Whether such an index would actually lead to increased visibility and in turn attract investments needs to be determined. And historical analysis is as good a tool as any. So, an index of shipping, shipbuilding and other maritime companies was conceived, in the same model as Sensex, to see how the index would have performed against the market.

For the readers who are unfamiliar with the market index here is a brief overview. The market indexes (Ex, SENSEX, NIFTY50 etc) give an overall picture of the markets’ performance. They reflect the performance of a select group of shares chosen from across industry verticals and capitalization(s) (to accurately reflect the market), weighted by the respective number of shares available for trade in the secondary market. So if the representative index goes up, it can be inferred that in general the share values went up. For a more detailed picture please visit this webpage. I intend to follow a similar approach to determine the shipping index.

The proponents of capitalism have also upheld the efficiency of the market to incorporate developments and expectations. Though it is too soon to predict the efficiency of the proposed index to do so, over the months the index might be expected to predict the course of the maritime industry in the country.

One of the other benefits mentioned by the INSA officials in developing a shipping index was the ability to generate investments. While, the role of an index in attracting investments is not clearly defined, one can compare monthly FDI inflows in the market to that in the maritime industry for similar growths and determine if there is a significant difference in the behavior historically. This should at least let one determine correlation the maritime industry in India has with the market.

Over the next few posts, this column will be defining the shipping index, determining the benchmarks, identifying the companies that should go into the index and provide the comparative performance of the shipping index with respect to the market (Sensex). I invite you all to provide suggestions to make the index more robust.

So keep your glasses ready, we will be “breaking the bottle” next time!!