July 2024 | India's Shipbuilding Surge and Green Innovations

BUILD... AND THEY WILL COME

We turn our eyes to India once again as we follow up on previous discussions about their growing petrochemical production. The Indian shipbuilding industry is surging ahead in a booming market where shipowners are scrambling for building slots. India is rising to compete with European and Far Eastern shipbuilders, positioning itself as a formidable contender. The Indian government has recognized shipbuilding as essential for promoting the country's industrialization ambitions, marking a significant shift in strategic priorities.

The Indian government's backing is pivotal in positioning Indian shipbuilding on the global stage. The government's 10% subsidies to Indian shipyards enhance their competitiveness. Furthermore, these shipyards are actively promoting green initiatives, offering vessel options for methanol and ammonia. The government's plan to allocate $600 million for inland and seagoing vessels further demonstrates its support for the industry's growth.

Military yards are being retooled to expand into the commercial market. European owners are showing their support for these Indian initiatives. Recently, newbuild contracts with German owners for constructing four 7,500 dwt multi-purpose ships have been signed with the state-owned Garden Reach Shipbuilders (GRSE), a traditionally military-focused yard. Other contracts have been signed with Norwegian owners for dredgers and dry cargo vessels with notable shipyards, including Goa Shipyard and Cochin Shipyard.

HOW TO GET IT

Shale oil production was a game changer for US energy needs. However, infrastructure challenges continue to influence the end game, even after years of production in both good and bad years. The US was an importer of crude oil in the past, but today, it is a strong exporter. Yet, this role is challenged by a restrictive logistics footprint. On the East Coast, the lack of an efficient pipeline system limits the competitive pricing of crude due to the cost of rail cars and potential environmental risks such as derailments and subsequent pollution and fires. The Gulf Coast is supplied with an efficient pipeline system, but it is challenged by inadequate loading facilities, limiting the size of vessels and amounts to be loaded. Expanding offshore loading terminals is a project for the future.

PANAMA CANAL THIRST

The Panama Canal has encountered significant hurdles in recent years due to water scarcity, which has hindered its ability to accommodate deep-loaded shipping traffic. As a crucial link between East and West, the canal is essential to global supply chains. To prevent future traffic disruptions and mitigate the impact of drought, the Canal Authority has greenlit a $1.2 billion construction project for a new reservoir. While recent rainfall has alleviated draft restrictions, the new reservoir is a long-term solution to ensure uninterrupted traffic flow.

LET'S GO GREEN

The market is buzzing with Union Maritime's plans for a $1.4 billion ship newbuild project, including MR and LR2 tankers with dual fuel LNG and some ships fitted with wind-assisted propulsion. The debate among owners continues whether to commit to LNG, methanol, or ammonia as the alternate fuel of the future. The latest reports in the MR fleet indicate 26 methanol-fueled, 12 LNG-ready, and five ammonia-ready vessels. In the MR segment, methanol is becoming the favored alternative in the latest new build cycle as owners gain more confidence in the geographic supply of green methanol. However, this scenario may change with the emergence of other alternative fuels, such as ammonia and hydrogen.