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Monday, 6 June 2011
Price war looms for shipyards on the mainland
Chinese shipyards could find it more difficult to compete against South Korea and Japanese on price alone if the yuan continues to appreciate against the US dollar, according to a leading ship financier.
Chinese shipyards could find it more difficult to compete against South Korea and Japanese on price alone if the yuan continues to appreciate against the US dollar, according to a leading ship financier.
While the price difference varies depending on the type of ship and shipyard, brokers said mainland shipyards were typically US$5 million-US$10 million cheaper than a South Korean rival for a new 180,000 deadweight tonne capesize dry bulk carrier. The current price for a capesize bulk carrier at a mainland shipyard is about US$53 million.
But newbuilding prices have been drifting lower as a result of slack demand caused by an excess of tonnage and a slowdown in the growth of dry cargo volumes.
Harald Serck-Hanssen, global head of shipping, offshore and logistics at Norwegian bank, DnB NOR, said: “The great benefit of the revaluation of the renminbi will be to make it more difficult for Chinese shipyards to have a pre-Christmas sale on in newbuildings.” As a result, fewer “owners will be encouraged to order ships on speculation”.
A frenzy of vessel ordering has gripped the shipping industry in recent years to affect all sectors including dry bulk, tankers and containerships. But it is the dry bulk sector that has been worst affected with more than 3,000 ships totalling 260.8 million deadweight tonnes due for delivery between now and 2014, according to British shipbroker Clarksons. In tonnage terms this is 47.3 per cent of the existing global fleet.
By comparison, cargo volumes are expected to grow at about 7-8 per cent year, although Chinese iron ore imports are forecast to fall this year to about 620 million tonnes, down from 630 million tonnes last year.
Chinese banks, such as Bank of China, ICBC and China Construction Bank, have reined in lending for ships in the wake of the tougher lending controls.
Rival international lenders said interest rates had increased to about 5 per cent above the London interbank lending rate for some transactions. This is higher than the 2 per cent to 2.5 per cent above Libor offered by international ship finance competitors.
Serck-Hanssen estimated that about 10 per cent of China’s oil imports were transported on mainland operated vessels.
For other commodities such as iron ore and coal the percentage is lower. But mainland shipowners such as China Ocean Shipping and China Shipping Development had a policy to increase the volume of long-term ocean transport contracts with mainland power and steel companies to ensure stable earnings and revenue streams.
Serck-Hanssen thought these shifts would have an impact on the amount of business independent owners could get for their ships. “The playing field for independent shipowners, whether Singaporean, Greek or Norwegian, will become smaller and more crowded,” he said.
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Price war looms for shipyards on the mainland
Keith Wallis in Singapore
18 April 2011
Chinese shipyards could find it more difficult to compete against South Korea and Japanese on price alone if the yuan continues to appreciate against the US dollar, according to a leading ship financier.
While the price difference varies depending on the type of ship and shipyard, brokers said mainland shipyards were typically US$5 million-US$10 million cheaper than a South Korean rival for a new 180,000 deadweight tonne capesize dry bulk carrier. The current price for a capesize bulk carrier at a mainland shipyard is about US$53 million.
But newbuilding prices have been drifting lower as a result of slack demand caused by an excess of tonnage and a slowdown in the growth of dry cargo volumes.
Harald Serck-Hanssen, global head of shipping, offshore and logistics at Norwegian bank, DnB NOR, said: “The great benefit of the revaluation of the renminbi will be to make it more difficult for Chinese shipyards to have a pre-Christmas sale on in newbuildings.” As a result, fewer “owners will be encouraged to order ships on speculation”.
A frenzy of vessel ordering has gripped the shipping industry in recent years to affect all sectors including dry bulk, tankers and containerships. But it is the dry bulk sector that has been worst affected with more than 3,000 ships totalling 260.8 million deadweight tonnes due for delivery between now and 2014, according to British shipbroker Clarksons. In tonnage terms this is 47.3 per cent of the existing global fleet.
By comparison, cargo volumes are expected to grow at about 7-8 per cent year, although Chinese iron ore imports are forecast to fall this year to about 620 million tonnes, down from 630 million tonnes last year.
Chinese banks, such as Bank of China, ICBC and China Construction Bank, have reined in lending for ships in the wake of the tougher lending controls.
Rival international lenders said interest rates had increased to about 5 per cent above the London interbank lending rate for some transactions. This is higher than the 2 per cent to 2.5 per cent above Libor offered by international ship finance competitors.
Serck-Hanssen estimated that about 10 per cent of China’s oil imports were transported on mainland operated vessels.
For other commodities such as iron ore and coal the percentage is lower. But mainland shipowners such as China Ocean Shipping and China Shipping Development had a policy to increase the volume of long-term ocean transport contracts with mainland power and steel companies to ensure stable earnings and revenue streams.
Serck-Hanssen thought these shifts would have an impact on the amount of business independent owners could get for their ships. “The playing field for independent shipowners, whether Singaporean, Greek or Norwegian, will become smaller and more crowded,” he said.
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