Shipping conglomerate Transworld Group has experienced a 30 per cent increase in fuel costs this year and plans to offset these by ordering new fuel-efficient vessels next year, a senior executive said.
The group, which has grown through acquisition of second-hand vessels, is now investing in new ships to help it beat increasing operational costs and to address the 20 per cent annual demand growth in sea cargo.
“Our fuel costs have increased more than 30 per cent this year and the best way to tame them is to have fuel efficient vessels. We also intend to tap into the growing regional demand in sea cargo,” Ramesh Ramakrishnan, President of Transworld Group, told Emirates Business in an interview.
The group, which operates short sea routes within the Gulf and other countries in the region through its subsidiary, Orient Express Lines (OEL), is looking at fighting off competition by expanding its fleet.
Ramakrishnan said his company will use a combination of internally accrued funds and bank loans to finance future purchases of vessels. He did not disclose details of cost or the ratio of loan financing. He, however, ruled out issuing shares to the public to raise money.
According to Allan McGregor, a maritime analyst in Dubai, the global shipping business is estimated to have experienced a robust growth of 15 to 20 per cent this year, with more tonnages and increase in routes.
McGregor attributed the current huge growth trends in global shipping to increased goods shipments from China and the massive demand for materials and supplies needed to sustain the physical growth of the Gulf and the Far East.
In the past three years, Transworld has ordered vessels worth Dh661 million. This month, the group awarded a Dh294m shipbuilding contract to Guangzhou Wenchong Shipyard for the delivery of two feeder container vessels.
The 175-metre ships are custom-built with two 45 SWL cranes and are designed with a maximum capacity of 1,740 TEU (20-foot equivalent units) and speed limit of up to 21 knots. The two vessels will be delivered in 2011. In 2005, Transworld awarded contracts worth Dh367m to Singapore Technologies Marine to build four feeder container vessels.
The 1,030 TEU vessels have a minimum length of 148 metres and a speed of 19 knots. Two of the vessels were delivered this year, while the remaining two will be delivered in February and May 2008. “This trend of building new vessels is going to continue. While we will continue to acquire second-hand tonnages, our company’s investments in new vessels will go up next year,” Ramakrishnan said.
The group has experienced growth of more than 15 per cent per annum over the past three years, riding on the seven per cent compounded annual growth rate (CAGR) in the trade between the Middle East and India. Trade between the region and the Subcontinent grew by 11 per cent this year.
Transworld began operations from Dubai in 1983 as a common carrier feeder operator. It initially provided feeder services linking the UAE hub ports with the ports on the west coast of the Subcontinent and the Arabian Gulf. It has expanded its network and now offers services connecting the Subcontinent and the Arabian Gulf with the transshipment ports of Colombo, Port Kelang and Tanjung Pelepas.
Transworld intends to add more feeder routes within the region as it plans to expand its geographical operations to other regions.