Commentaries | Jan 11,2020
The state-owned Ethiopian Shipping & Logistics Services Enterprise (ESLSE) is one step closer to acquire two cargo ships, though it is yet to secure financing to commission the ship-build.
The acquisition has coincided with a global logistics crisis precipitated by the COVID-19 pandemic, leading to a surge in shipping prices and the cost of containers. The decision to add vessels to its fleet was made when prices for cargo ships went through the roof. A 10-year old vessel costs twice the amount from four years ago, according to data from Clarkson Research Services Ltd, a Uk-based firm engaged in collecting and analysing merchant shipping.
The Enterprise wants to acquire two vessels with a load capacity of 65,000tn each.
Close to 21 companies have shown interest to deliver the vessels, of which half submitted their offer upon deadline in June this year. Three have qualified to the final stage of evaluations. Two of these companies are based in China, while Al Meriyan International FZE, an Emirati supplier, bid for the Chinese Jiangsu Yangzijiang Shipbuilding Group. One of the two Chinese companies, New Dayang Shipbuilding Co. Ltd, was formerly known as Yangzhou Dayang Shipbuilding, a subsidiary of Sinopacific Shipbuilding. It had filed bankruptcy in 2016, following a decade of financial troubles for its parent company, Evergreen Holding Group.
The Chinese state owns majority shares in the third bidder, Nantong Xiangu Shipbuilding & Offshore Engineering, incorporated in 2016.
The Enterprise, however, has yet to secure a source of finance for the acquisition to cover 70pc of the building cost.
"We're getting a good response," said Wondimu Denbu, deputy CEO for corporate services at ESLSE, speaking of the company's search for a prospective financier.
The Deputy CEO hopes the acquisition will help address the issues the Enterprise, whose fleet comprises nine dry vessels and two oil tankers, has been facing in recent months. The disarray left in the wake of the pandemic has led its executives to raise shipping fees by as much as 400pc. It has also spent 36 million dollars on the procurement of 6,000 shipping containers this year.
Industry insiders are doubtful whether the new vessels will provide relief for the Enterprise. The ships to be commissioned for building will not be delivered for at least a year, as a shipyard can take up to 13 months to build large dry-cargo vessels.
Fitsum Mengesha, deputy manager of Samatra Logistics & Shipping Plc, a freight forwarder operating for nearly three decades, welcomed the decision to acquire the vessels but does not see it as a solution for the crisis haunting industry.
"It would take years to see the change that the acquisition could bring," he said.
Fitsum Tilahun, an expert in logistics, sees no end in sight for the problems plaguing the industry unless private operators join the logistics sector. He argues the only dependable solution would be to allow the private sector to get involved, ending the state monopoly on shipping.
"Procurements alone won't do much to ease the problems," he said.
Last week, federal authorities announced that up to five private operators will be allowed to engage in cargo shipments under Free on Board (FoB) terms, though experts contest this would be of little help in withstanding the logistics crisis.
PUBLISHED ON Oct 09,2021 [ VOL 22 , NO 1119]
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