Coastal shipping as a viable means of transportation

Background
Best Cement Plc., a manufacturer of multinational building materials, headquartered in Europe, wished to expand its presence in India inorganically. As a part of its overall India strategy, the company was evaluating the acquisition of multiple assets, including two cement plants and a captive jetty. CRISIL Infrastructure Advisory (CRIS) was appointed as consultants to assess the technical and commercial feasibility of utilizing the captive jetty for: 1. Cement and clinker logistics via coastal shipping, and 2. Import of coal for captive power

Execution Plan
The project encompassed an analysis from both the technical and commercial perspectives to get a holistic picture of the projects overall viability and the key risks involved. The study was to compare coastal shipping with the alternative logistics modes of rail and road. The entire study was modularized as below:

Review of coastal shipping mode Plant operations and assessment of as-is logistics Route assessment and feasibility Voyage analysis Logistics cost analysis Suggested options for Best Cement Viability assessment and risk identification

Assessment of scale and existing logistics operations

Activity Roadmap
To start with, the scale of operations and the existing logistical modes were analyzed so as to gain an appreciation of the volume to be moved by coastal traffic and through imports. The upcoming plant developments were taken into consideration and the key commodities (product, raw materials and intermediaries) for coastal shipping and imports were identified based on an origin-destination analysis. The current logistics chain was analyzed to understand the cost incurred in transportation, the dependencies on external environment, and the key issues being faced.

In the next stage, the analysis of coastal shipping and imports with the captive jetty as the pivot was undertaken to assess the viability and attractiveness of coastal shipping vis--vis alternate options. The identified routes were evaluated for technical operability; marine conditions at approach channels, anchorage, berth locations and configuration, draft availability, siltation, etc. were analyzed. Also, the infrastructure assessment was done at both the origin and destination ports, in terms of possible berth operations, marine operations, inland connectivity, tariff, constraints and limiting factors such as yearround operations and movement of barges given the tidal variation and existence of sandbars, etc. On the voyage side, a vessel analysis was undertaken to understand the kind of ships or barges that could be used in view of technical and commercial constraints. To assess the commercial attractiveness, a Logistics Cost Analysis was done based on all legs of transportation vis-a-vis existing modes. For this, the various capital and operational costs at each leg of transportation was evaluated for the various alternate shipping options for each commodity. Finally, the key risks were identified and potential mitigation strategies recommended.

Value Proposition
In a short span of five weeks, CRIS conducted an in-depth study, uncovering some of the key hidden risks in the shipping process and presented alternatives such as direct berthing or transshipment at the captive jetty for evaluation. In order to gain practical implications, the study was augmented by primary site visits and interactions with various stakeholders (e.g. port operators, custom house agents, vessel charterers, mariners, etc.). With its expertise in understanding of marine conditions, CRIS was able to identify the area of main bottleneck in the coastal shipping route and suggest possible workarounds. Also, CRIS identified that the jetty design put a restriction on the jetty capacity to handle the required volume of different types of cargo and suggested an alternative vessel berthing format to optimize the capacity. The analysis of the destination ports unveiled the kind of vessels ideal for the identified routes. In summary, a holistic analysis of both technical and commercial aspects was carried out to identify the best possible strategy for Best Cement. The study acted as a key decision factor for Best Cement on its acquisition strategy and enabled the client to take informed decisions. CRIS would be pleased to answer any query related to this case study. For any query/ information, please contact us at transport@crisil.com