Bulk carrier enters early adolescence

23 August 1996

The youngest shipping venture in the Gulf is just four years old and already planning to launch an expansion. Qatar Shipping Company (Q-Ship) saw profits leap three-fold in 1995 and has just approved a QR 350 million fleet development plan. Q-Ship was a pioneering joint stock company when it was set up and shows every sign of rewarding its founders for their foresight.

Created by Emiri decree, Q-Ship has targeted the growing bulk import-export market, offering competitive shipping rates to Qatar's large industrial producers. It brought together private investors and majority-owned state agencies such as Qatar General Petroleum Corporation (QGPC), Qatar National Bank and Qatar Steel Company (Qasco), and started commercial operations in 1994 with two 135,000 dwt ore/bulk/oil (OBO) carriers and a 96.700 dwt oil/dirty petroleum products tanker. On 8 November 1994, it won its first major contract. This was a three-year deal with Qasco to transport 650,000 tonnes a year of iron ore pellets from Norway and Brazil to Umm Said.

The Qasco deal fully employs the two OBO vessels and is the core of the Q-Ship operation. To maximise usage, the ships carry back-haul cargoes, moving iron ore and coal from South Africa and India to Europe.

Q-Ship's iron ore handling business has been augmented this year with the signing of a one-year contract with Bahrain-based Gulf Industrial Investment Corporation (GIIC) to supply 250,000-350,000 tonnes of product.

The contract with GIIC fits neatly into QShip's strategy of achieving as high a rate of efficiency as possible, as general manager Bryan Archer explains. 'In Bahrain the water depth limit is 12.8 metres, whereas here it is 11.27 metres. What the GIIC contract allows us to do is load up the vessels to 95,000 tonnes, deliver cargo first to Bahrain, and then move onto Umm Said. If we came direct to Umm Said, we would only be able to transport 75,000-76,000 tonnes.'

The GIIC contract has also enabled QShip to time charter a 128,000-dwt bulk carrier from Norway's Leif Hoegh, with an option to purchase for $14 million.

Q-Ship's other main activities revolve around oil. Over the past 12 months, its single tanker has been mainly employed loading fuel oil cargoes from Bandar Khomeini in Iran and discharging them in Australia, the Far East, East Africa and at Red Sea ports. It is also involved in a one-year contract with QGPC to shuttle its equity share from the offshore Al-Shaheen field to the Halul island loading terminal.

The Q-Ship fleet is set to double its capacity over the next 18 months, as the second-stage development plan, drawn up by the UK's Drewry Shipping Consultants, is implemented. In keeping with past practice, the company plans to buy second-hand vessels of five-seven years of age. Two of the newly-acquired vessels will be put into service on existing contracts; a second oil/dirty petroleum products tanker of about 97,000 dwt will be acquired to service the Al-Shaheen deal and regional operations; and a 130,000 dwt Capesize bulk carrier will be bought to supplement the two OBOs working on the Qasco contract.

The two other vessels should open up new business areas for the company. A clean petroleum products tanker of about 40,000 dwt will be put into service on the fast-growing trade between the Gulf and Asia in petrol, diesel and kerosine. A multipurpose craned bulk carrier of similar size is also being sought, with the main aim of breaking into the urea export market. The inter-Gulf trade in semi-finished steel products could also be a target.

With an expanded fleet, Q-Ship will be looking to develop its local business contacts and tie up longer term contracts. 'We are focusing mainly on the major industries in Qatar,' says Archer. 'We are based here and we know our customers' needs. Obviously, Qasco is our main client at the moment, but we also want to do more with QGPC.'

One area of opportunity is on the liquefied petroleum gas (LPG) front. Last September, the company joined forces with the US-based Contichem to bid for a fiveyear contract to ship LPG for QGPC. The joint bid received conditional acceptance, although the contract has not gone into effect, as QGPC has been unable to market its LPG on a delivered basis as it had hoped.

Q-Ship is also drawing up plans to take over the technical management of its fleet from MMS, which is based in the Isle of Man. This is unlikely to come into effect before the company has moved into new headquarters on the corniche in 1998.

Despite the positive tone set by the expansion plans, it has not been all plain sailing for Q-Ship. A ferry passenger service from Doha to Dubai failed to generate customers and racked up losses of QR 7 million before it was terminated in 1995 after only three months of operations. The company also cancelled a contract, signed last October with Romania's 2 Mai Managalia Shipyard, for a $20 million bulk carrier, when a shareholder in the yard claimed that the vessel could not be built for the agreed price. Instead, Q-Ship is heading for the second-hand market, where prices for a similar-sized carrier have been falling in recent months.

Little setbacks have done nothing to shake Q-Ship's conviction that it is meeting an important need in Qatar and that it has a bright future. 'There is no question now that there is a place for Q-Ship,' says Archer.

'We have done a seven-year forward outlook plan, that shows profits will be QR 150 million, or five times what they are now. We are talking about a rapid upward climb and a very healthy cash flow.'

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