PNSC plans fleet expansion with new Aframax vessels

KARACHI: The Pakistan National Shipping Corporation (PNSC), the national flag carrier, plans to expand its fleet by acquiring new Aframax ships to enhance its maritime capabilities.

According to a report by JS Global, the PNSC management shared its financial performance and future plans during a corporate briefing.For FY24, the PNSC reported consolidated earnings of Rs46 billion, reflecting a 15 per cent year-on-year (YoY) decline, primarily due to a 48 per cent YoY drop in the dry cargo segment, which was impacted by reduced average charter rates.

Slot charter operations fell 33 per cent YoY as government consignments decreased, with no business from the Trading Corporation of Pakistan (TCP), which had contributed around Rs2.8 billion during the previous fiscal year. Despite these challenges, revenue from the liquid cargo segment remained stable at Rs40 billion.

Other income declined by 17 per cent YoY, affected by the absence of gains from vessel disposals (approximately Rs3.3 billion in FY23) and a lack of exchange gains due to a stable currency.

However, management expects improved demand in the current year, particularly supported by the dry bulk segment and new break-bulk orders from the government. The PNSC plans to replace four of its five Aframax vessels, which are 18 to 19 years old. International tenders have been issued, with bids received from shipyards in the UK, China, and other countries. Contract finalisation is expected by the end of CY24.

Under the State-Owned Enterprises Act 2023, the PNSC is now allowed to develop its procurement policies in line with international shipping industry practices, pending approval from the federal cabinet.

The new vessels will comply with the International Maritime Organization’s emission reduction targets, including a 20 per cent reduction by 2030, 70 per cent by 2040, and net-zero emissions by 2050. These tankers will feature internally coated tanks, allowing them to carry both dirty and clean liquids, thereby increasing market acceptance.

The PNSC plans to finance the purchase of the new vessels using a mix of equity and debt, with 80 per cent of the transaction cost expected to be financed through debt. The estimated cost of brand-new or under-construction Aframax tankers, with signed contracts for early delivery, is $85 million each, while new-built contracts range from $73 million to $75 million.

Regulatory requirements prevent the acquisition of vessels older than five years. Currently, used Aframax vessels are priced around $12 million, with a scrap value of $7 to $10 million.The company also aims to maintain its dry dock operations, with five vessels scheduled for maintenance. One tanker vessel will be out of operation for 40 to 45 days, while four dry bulk vessels will undergo dry docking for 25 to 35 days.

The current fleet includes Aframax vessels aged 18 to 19 years, LR-1 vessels aged 12 years, and dry bulk carriers aged 16 to 17 years. Charter rates stand at $30,000 to $35,000 per day for Aframax tankers, $10,000 to $11,000 per tonne perday for LR-1s, and $11,000 per day for bulk carriers.