Volatility in the freight market and the concomitant economic squeeze being faced by the shipping industry worldwide have not taken the steam out of Essar Shipping's fleet expansion programme.

Essar has justified its move to induct six mini capsize vessels into its fleet by mid-2012 despite the present market trends, as it sees significant potential for these specially designed shallow draft ships in Indian port conditions.

It is getting the six vessels from STX Dalian Shipyard at a cost of about $ 400 million, with the first of the ships anchoring at Australian port today to pick up a coal consignment for the Essar Group.

The second of these vessels will be joining the Essar fleet by the first week of February 2012, and from then on one vessel will be inducted every month.

The company feels that this relatively new category of vessels, which is in between a cape size and supramax size ship, can rake in better margins by operating in Indian ports as these are shallow draft vessels.

“These vessels are specially designed shallow drafted vessels that will provide substantially higher cargo carrying capacity focused on relatively lower draft conditions of Indian ports,” Mr A. R. Ramakrishnan, the company's Managing Director, told Business Line.

With Indian ports largely having relatively shallower drafts, these vessels, which have a carrying capacity of 100,000 tonnes with a draft requirement of just 13.7 mts, are best suited for Indian port conditions, the company feels.

Essar Shipping has an acquisition programme for $ one billion, out of which $ 600 million is for 12 vessels to be delivered over the next 24 months, and the rest for two jack-up rigs. The 12 vessels will together scale up the company's fleet strength to 2.6 million tonnes from the current 1.7 mt.

Mr Ramakrishnan admitted that freight markets will remain under pressure for most part of 2012.

With the Baltic Dry Index dropping from 2071 in October 11 to 1,750 levels in the last week of December 2011, vessels of similar capacities are today earning just about $ 18,000 a day in the spot market.

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