L&T Negotiating $1B Shipbuilding Orders

Monday, November 12, 2007
India’s largest engineering and construction firm Larsen & Toubro Ltd. (L&T) is negotiating with global shipping fleet owners to build ships worth over $1b, but the company cannot finalize these orders because it still hasn’t received the requisite clearances for its shipyard from a local government. L&T plans to set up the country’s biggest shipbuilding facility at Kattupalli in Tamil Nadu in an effort to tap growing domestic and global demand for ships. The company will invest around Rs3,000 crore in the shipyard and port project and will build cargo ships, warships and offshore oil rigs. The shipyard at Kattupalli will be capable of building 25 big ships in a year and repair another 50-60 ships. L&T would reportedly build very large crude carriers, ships to carry liquefied natural gas and compressed natural gas, car carriers, container ships, warships and frigates. L&T has hired the Rostock, Germany-based consultant Ingenieurtechnik und Maschinenbau GmbH (IMG) to develop a master plan and design for the shipyard. The company also reportedly plans to bring in a Japanese or South Korean shipyard as a technology partner at a later date. The port facility at Kattupalli will cater to clean cargo and also handle cargo of the nearby special economic zone being developed by the state-owned Tamil Nadu Industrial Development Corporation Ltd. (Tidco). Clean cargo refers to things such as foodgrains, cars and other vehicles, and finished products as opposed to coal, iron ore and the like. When fully operational, the shipyard and port will employ close to 10,000 people. L&T plans to begin construction of ships at Kattupalli by the end of 2009 and deliver its first ship a year later. L&T ventured into the shipbuilding business last year by converting part of its heavy engineering complex at Hazira, near Surat in Gujarat, into a yard that could build three mid-size ships a year with a cargo-carrying capacity of 15,000 to 20,000 tonnes. Although the company is now expanding the capacity of the Hazira yard to make eight ships a year, it cannot make bigger ships there. The yard opens into a river that has limited draft (depth in shipping terminology). That explains the company’s decision to build a new yard at Kattupalli, a port owned by the Tamil Nadu government, which has been earmarked for development through private investments. India has around 20 shipyards, the majority state-owned, but none has the kind of capacity L&T is talking about at its new yard. Cochin Shipyard Ltd., which can build the largest ships currently, can build ships with a cargo-carrying capacity of 110,000 tonnes. With capacities in traditional shipbuilding countries such as Japan, South Korea and Norway booked for the next few years, fleet owners have started looking at new destinations such as China, Vietnam and India. Local builders such as ABG Shipyard Ltd., Bharati Shipyard Ltd. and L&T are expanding capacities to meet this demand. India’s share in the global shipbuilding business is expected to grow to around 15%, or $22b, by 2020 from the current level of 0.4%, aided mainly by cost competitiveness and abundant supply of skilled manpower, according to a report by Mumbai-based consulting firm i-maritime Consultancy Pvt. Ltd. [Source: http://www.livemint.com]
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