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Wednesday, 18 March 15
CHINA-OWNED SHIPS: A RAPID RISE TO BECOME ONE OF THE WORLD'S LARGEST FLEETS - RICHARD SCOTT
 Ships operated by owners based in China have become increasingly prominent on the world’s sea routes. China-owned container ships, bulk carriers, tankers and other vessels are seen more frequently in ports around the world. These ships now constitute the third largest fleet as identified by ownership and control nationality, following Greece in the number one position and Japan at number two. And the China-owned fleet is set to become much larger, one indication of which is a huge volume of new vessels on order at shipbuilding yards. This article looks at how and why rapid fleet expansion has evolved, and who are the major players.
Fleet growth has evolved alongside the spectacular advance of China’s seaborne trade since the early 2000s. Many second-hand ships have been bought by Chinese owners from foreign companies, while newbuilding vessels have been acquired on a vast scale. But the China-owned fleet’s enlargement has generally lagged behind the growth of the country’s import and export cargo movements. This widening gap may be reduced over the years ahead.
The fleet’s tidal surge
During the past ten years, the China-owned fleet has more than tripled in size. From 37.7 million gross tons (GT) at the end of 2004, total capacity rose by 216 percent to reach 119.2m GT at end-2014, according to figures compiled by Clarkson Research and shown in the graph, including all ships of 100 GT and above. This pace of growth was faster than seen in the entire world fleet; consequently China’s share of the global total increased from 6 percent to just over 10 percent.
Expansion has been seen in all the vessel-type categories. The bulk carrier fleet saw the most rapid advance, especially since 2008. Between 2004 and 2014 this fleet almost quadrupled to 69.2m GT, forming the largest portion of China-owned tonnage. The tanker and container ship fleets tripled in size over the past decade to 21.2m GT and 13.7m GT respectively at end-2014. All other ship types together grew less rapidly by seventy-six percent, to reach 15.1m GT. Included in this ‘other ships’ category are gas carriers, multi-purpose and general cargo ships, roll on-roll off vessels and vehicle carriers, cruise and passenger ships and offshore vessels. A large part of these fleets is involved in international trade, but many ships are employed wholly within the huge Chinese coastal cargo movements.
Two aspects of the figures need clarification. Firstly, the choice of gross tonnes to provide an indication of cargo-carrying capacity. For bulk vessels (tankers and bulk carriers) the usual measurement is deadweight tonnes, and for container ships the TEU (twenty-foot equivalent unit) is normally used. Gas carriers are generally described in cubic metres capacity, and other ship types by a variety of tonnages. Gross tonnes provides a convenient common measurement.
Secondly, how can the country of ownership of a vessel be defined? As is well known, a vessel’s flag (the flag of the state in which it is registered) typically provides no indication of ownership nationality. The ownership country is where full control (the parent owning company) is located. However, identifying this location relies heavily on interpretation and subjective judgements. In some cases the real ownership location may be obvious, but in many other cases it is less or much less apparent. At the end of 2014 there were over 89,000 ships included in the world’s merchant (commercial) ship fleet. In a typical year, a huge number of changes take place. Identifying ownership, and tracking changes for the entire fleet is a highly challenging task, and it seems quite likely that numerous mistakes occur, probably unavoidably, despite thorough checking. Perhaps these figures should be viewed as a broad, rather than precise, indication of ownership nationality.
As an example of how statistical data differs, slightly changing perceptions, the foregoing figures can be compared with the widely-used United Nations Conference on Trade and Development statistics. These UNCTAD figures are compiled in deadweight tonnes, and include only vessels over 1000 GT, which are contributory reasons for differences. In this analysis the China-owned fleet’s proportion rises from 6.8 percent of the world total at the end of 2004, to 11.9 percent at end-2013 (the latest available data). The starting position in that decade therefore is almost one percentage point higher than in the data set already discussed, while the ending position is almost two percentage points higher. Moreover, when UNCTAD changed data providers in 2012, the identified China-owned fleet’s deadweight capacity jumped by 53 percent in just one year. Also, the proportion of the world total abruptly increased over twelve months by three percentage points, to 11.8 percent. This narrative seems to illustrate how identification of true ownership is not an exact science and varies among statisticians.
Chinese characteristics
Fleet tonnage expansion involved a huge rise in the number of individual China-owned vessels trading, from 3.821 at the end of 2004, to 6,532 at end-2014, based on Clarkson data. The percentage rise, 71 percent over the decade was well below that of gross tonnage, owing to a rising average vessel size. At the beginning, the average vessel size employed was 9,859 GT, rising to 18,242 GT at the end, an 85 percent increase.
One significant characteristic of the current fleet is the predominance of relatively young ships. At the end of 2014, based on the number of vessels, 80 percent of tankers were less than ten years old (built 2005-2014). The comparable figure for bulk carriers was 68 percent, and for container ships 51 percent. Modern ships usually have superior operating advantages, being more efficient and more economical.
A large part of the China-owned fleet is operated under open registries. At the end of 2013, based on UNCTAD figures, 63 percent was registered by foreign flags, similar to the 65 percent proportion one year earlier, up from 49 percent ten years earlier. The role of the Hong Kong flag has grown strongly. The advantage of this arrangement, for many China-owned ships involved in international trade, is greater operational, financial and regulatory flexibility under open registries, compared with national flag registration. Ships participating in coastal trade are required to fly the Chinese national flag.
While much of the fleet growth reflected new ships purchased, China’s shipowners’ vessel purchases on the international second-hand market also comprised a major part. In 2014, for example, a 5.7m GT total was bought, according to Clarkson, although 56 percent of the number of vessels resulted from transactions with domestic owners. Second-hand purchases often have substantial advantages for buyers, including immediate availability for trading and, often, involve lower capital expenditure than a comparable newbuilding vessel.
Although growth in the China-owned fleet has been impressive over the past decade as a whole, annual growth varied greatly, within a 2 percent to 25 percent range. The fastest annual advances were seen in 2009 and 2010, when there were two consecutive 25 percent surges. Since then, a marked deceleration has occurred, down to only a modest 2 percent in 2014, when the bulk carrier fleet’s capacity actually diminished marginally, and tanker fleet capacity was flat.
Policy and economics drivers
Accompanying this fleet evolution, several recent signs of broad action by China’s government on aspects of shipping policy have been seen. At the beginning of this year, the Ministry of Transport published details of aims for upgrading the country’s shipping industry and improving services and competitiveness in the global marketplace. Previously, two months earlier, intentions to support and modernise China’s shipping were reported. Specific items listed were encouragement of mergers and acquisitions and private investment involvement, together with development of cruise shipping. More support from domestic financial institutions was encouraged. These policy objectives followed publication of guidelines for developing and supporting shipping, including tax changes and regulatory reform, while applying pressure on companies to improve and modernise their fleets. The stated aim was to build an efficient, safe and environmentally friendly Chinese shipping system by 2020.
Previously, towards the end of 2013, a new scrapping subsidy plan was introduced by the Chinese government to benefit both shipping and shipbuilding industries in China over the period up to 2015. The subsidy is restricted to China-flagged ships. Shipowners participating are required to place newbuilding orders with Chinese shipbuilders at least equivalent to the vessel tonnage being scrapped in domestic recycling yards. This policy has assisted a number of Chinese shipowners with their fleet renewal programmes. The plan was seen as being especially valuable for the coastal trading fleet operating under the China flag.
For some time, it has been clear that the Chinese government’s intention is to achieve a larger proportion of the country’s seaborne trade transported by ships owned by companies based within China. This aim has been most visible in the VLCC (very large crude carrier) segment of the oil imports trade.
Reports have suggested that the government’s target is to see as much as 85 percent of foreign crude oil purchases carried by Chinese controlled ships. A huge newbuilding order by Chinese shipowners for up to eighty VLCCs has been anticipated, as a result. But, although a number of new tankers of this type have been ordered, and some have already joined the fleet, there are no signs of the target being achieved. According to a recent report by E A Gibson Shipbrokers, only 8 VLCCs were delivered to Chinese controlled companies in 2014, preceded by just 5 in the previous twelve months. However, orders for new VLCCs stood at around 30, for delivery at a rate of about 10 ships annually from this year up to 2017, implying a possible acceleration in the pace of transport capacity expansion.
A trend of expanding global seaborne trade volumes, a major contributor to which comprises rising imports into, and exports from, China provides growing opportunities for participation by Chinese shipowners. Cost-competitiveness enhances potential for involvement. These features, becoming well established over the past decade or longer, are the fundamental economic drivers of growth in the China-owned fleet of ships. But there is some evidence that subdued freight rates on the international market, and therefore low profitability for shipowners, during many of the past few years, has deterred investment by Chinese companies. In these circumstances, China-owned ships, employed in both China import or export trade and in international cross-trades, experience poor or mediocre investment returns.
Prominent players
Within the entire China-owned fleet of ships of all types, about two-fifths measured in gross tonnes is contributed by three state-owned enterprises. These are: China Ocean Shipping Company (Group), usually known as COSCO; China Shipping Group (CSG); and Sinotrans & CSC. Another prominent company, also state-owned, is China Merchants Group. The largest shipowner in the private sector is HOSCO.
A number of separate individual company fleets of specific vessel types are large parts. At the end of 2014 there were nine, each of at least 2 million GT, which dominated the industry. The biggest, according to Clarkson data, were COSCO Group’s bulk carrier fleet amounting to 160 ships of 8.7m GT, China Shipping’s container ship fleet totalling 76 ships of 5.8m GT, and the COSCO container ship fleet consisting of 79 ships totalling 4.5m GT. The next largest component was the 4.4m GT tanker fleet in the new China VLCC pool.
In August last year, a joint venture to operate VLCCs was announced by China Merchants Energy Shipping (with a 51 percent shareholding) and Sinotrans & CSC (49 percent shareholding). China Merchant’s existing nine tankers of this type were the initial component, together with ten newbuildings on order. A few months later the new enterprise, named China VLCC Company, acquired eight VLCCs from the bankrupt Nanjing Tankers, originally a subsidiary of Sinotrans & CSC. Another nine VLCCs operated by Nanjing, plus a recently-delivered newbuilding, were taken over by year-end, raising the China VLCC total to 28 tankers. This company seems destined to be one of the tanker market’s largest players.
Navigating further growth ahead
What is the outlook for future fleet development? One clear indication is new ships currently on order for China-based shipowners. At the end of 2014, Clarkson statistics show that the total of these was 625 ships of 32.1m GT, equivalent to 27 percent of the capacity of the existing 119.2m GT operational fleet. This huge order volume was the largest by owner nationality, exceeding that of Greece (30.4m GT), Japan (15.4m GT) and Germany (11.0m GT). Just over half of the China total volume, 16.4m GT is scheduled to be completed by shipyards and delivered to owners within the current year, 2015. A further 12.2m GT is due for delivery in 2016.
Although this new capacity being added implies fleet expansion, projections for China (and other countries) are often surrounded by great uncertainty. Aspects which are usually difficult to forecast reliably are numerous. Major uncertainties include the timing of newbuilding deliveries (compared with the recorded order book schedule), and how much additional ordering will occur. Also, scrapping of existing old or obsolete tonnage is hard to predict. The disposal of existing ships in the fleet to, and acquisitions from, owners located elsewhere (second-hand sale and purchase activity) is not accurately predictable either.
Nevertheless, signs point firmly towards continued enlargement of cargo-carrying capacity in the China-owned fleet of ships during this year, the Year of the Goat and further ahead. The large-scale order book is a convincing indicator, and anecdotal evidence also demonstrates intentions to add tonnage. Backed by a government strategy for shipping industry development, and accompanied by President Xi Jinping’s vision of a 21st century Maritime Silk Road, the China-owned fleet seems set to achieve greater prominence.
Source: Article by Richard Scott, Visiting Lecturer, China Maritime Centre, University of Greenwich & MD, Bulk Shipping Analysis | Hellenic Shipping News
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Wednesday, 21 June 23
CHINA'S MAY COAL IMPORTS FROM AUSTRALIA RECOVER TO PRE-BAN LEVELS - REUTERS
Australian coal sales to China increased in May, as trade resumed between them even as overall coal demand weakened against an uncertain macroecono ...
Monday, 19 June 23
DROUGHT-DEPLETED HYDROPOWER DRIVES CHINA TO TURN TO COAL - REUTERS
China has leant hard on coal-fired power plants as well as wind and solar generators to make up for a shortfall in hydroelectric generation as a re ...
Monday, 19 June 23
CHINA COAL OUTPUT UP 4.2 PCT IN MAY - XINHUA
China’s raw coal output posted steady growth in May, official data showed.
The country produced 390 million tonnes of raw coal ...
Wednesday, 24 May 23
AMMONIA-FUELLED BULK CARRIERS WITHIN FIVE YEARS - BALTIC EXCHANGE
Within five years, ships powered by clean ammonia could be a feature on the iron ore trade routes between West Australia and East Asia.
A study ...
Tuesday, 23 May 23
CHINA'S APRIL COAL OUTPUT LEAPS 11% ON YEAR, BUT DEMAND DOWNTURN LOOMS - REUTERS
China’s daily coal output in April jumped 11% from the same month a year earlier, boosted by Beijing’s order to increase supply to ensu ...
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- GAC Shipping (India) Pvt Ltd
- AsiaOL BioFuels Corp., Philippines
- Agrawal Coal Company - India
- Altura Mining Limited, Indonesia
- Standard Chartered Bank - UAE
- Directorate Of Revenue Intelligence - India
- GMR Energy Limited - India
- Indian Oil Corporation Limited
- Leighton Contractors Pty Ltd - Australia
- Makarim & Taira - Indonesia
- Kumho Petrochemical, South Korea
- Toyota Tsusho Corporation, Japan
- Sindya Power Generating Company Private Ltd
- LBH Netherlands Bv - Netherlands
- VISA Power Limited - India
- Economic Council, Georgia
- Maheswari Brothers Coal Limited - India
- Pendopo Energi Batubara - Indonesia
- Energy Development Corp, Philippines
- PowerSource Philippines DevCo
- Ministry of Finance - Indonesia
- Bukit Makmur.PT - Indonesia
- ASAPP Information Group - India
- Dalmia Cement Bharat India
- ICICI Bank Limited - India
- Goldman Sachs - Singapore
- Ceylon Electricity Board - Sri Lanka
- Straits Asia Resources Limited - Singapore
- Manunggal Multi Energi - Indonesia
- SMG Consultants - Indonesia
- Electricity Authority, New Zealand
- Thai Mozambique Logistica
- Cigading International Bulk Terminal - Indonesia
- European Bulk Services B.V. - Netherlands
- Wood Mackenzie - Singapore
- Vedanta Resources Plc - India
- PTC India Limited - India
- Price Waterhouse Coopers - Russia
- Grasim Industreis Ltd - India
- Indonesian Coal Mining Association
- Uttam Galva Steels Limited - India
- Orica Mining Services - Indonesia
- Eastern Coal Council - USA
- Global Green Power PLC Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- The Treasury - Australian Government
- PetroVietnam Power Coal Import and Supply Company
- Orica Australia Pty. Ltd.
- Port Waratah Coal Services - Australia
- Kohat Cement Company Ltd. - Pakistan
- Parliament of New Zealand
- Samtan Co., Ltd - South Korea
- CNBM International Corporation - China
- Banpu Public Company Limited - Thailand
- Sree Jayajothi Cements Limited - India
- Bukit Baiduri Energy - Indonesia
- TeaM Sual Corporation - Philippines
- Krishnapatnam Port Company Ltd. - India
- Videocon Industries ltd - India
- Bayan Resources Tbk. - Indonesia
- Bulk Trading Sa - Switzerland
- TNB Fuel Sdn Bhd - Malaysia
- Siam City Cement - Thailand
- Gujarat Sidhee Cement - India
- Bhushan Steel Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Vijayanagar Sugar Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Chamber of Mines of South Africa
- Chettinad Cement Corporation Ltd - India
- Independent Power Producers Association of India
- Singapore Mercantile Exchange
- PNOC Exploration Corporation - Philippines
- Vizag Seaport Private Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Jindal Steel & Power Ltd - India
- Renaissance Capital - South Africa
- Binh Thuan Hamico - Vietnam
- Petron Corporation, Philippines
- Australian Commodity Traders Exchange
- MS Steel International - UAE
- Siam City Cement PLC, Thailand
- Mercuria Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Alfred C Toepfer International GmbH - Germany
- Directorate General of MIneral and Coal - Indonesia
- Trasteel International SA, Italy
- Madhucon Powers Ltd - India
- Indika Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Coastal Gujarat Power Limited - India
- Formosa Plastics Group - Taiwan
- Power Finance Corporation Ltd., India
- Maharashtra Electricity Regulatory Commission - India
- Ambuja Cements Ltd - India
- Karaikal Port Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Indo Tambangraya Megah - Indonesia
- New Zealand Coal & Carbon
- International Coal Ventures Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Merrill Lynch Commodities Europe
- Sojitz Corporation - Japan
- Indogreen Group - Indonesia
- San Jose City I Power Corp, Philippines
- Central Java Power - Indonesia
- Bangladesh Power Developement Board
- Sinarmas Energy and Mining - Indonesia
- Heidelberg Cement - Germany
- Intertek Mineral Services - Indonesia
- Cement Manufacturers Association - India
- Posco Energy - South Korea
- IEA Clean Coal Centre - UK
- White Energy Company Limited
- Metalloyd Limited - United Kingdom
- Sakthi Sugars Limited - India
- Africa Commodities Group - South Africa
- OPG Power Generation Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Parry Sugars Refinery, India
- Coalindo Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Karbindo Abesyapradhi - Indoneisa
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- Antam Resourcindo - Indonesia
- Ministry of Transport, Egypt
- Gujarat Mineral Development Corp Ltd - India
- Planning Commission, India
- Coal and Oil Company - UAE
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bharathi Cement Corporation - India
- Wilmar Investment Holdings
- GN Power Mariveles Coal Plant, Philippines
- Jaiprakash Power Ventures ltd
- Anglo American - United Kingdom
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Commonwealth Bank - Australia
- Baramulti Group, Indonesia
- Iligan Light & Power Inc, Philippines
- Semirara Mining and Power Corporation, Philippines
- The University of Queensland
- Star Paper Mills Limited - India
- Marubeni Corporation - India
- Medco Energi Mining Internasional
- Eastern Energy - Thailand
- Borneo Indobara - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bhoruka Overseas - Indonesia
- Thiess Contractors Indonesia
- Holcim Trading Pte Ltd - Singapore
- Sical Logistics Limited - India
- Bhatia International Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Attock Cement Pakistan Limited
- Romanian Commodities Exchange
- Edison Trading Spa - Italy
- Meralco Power Generation, Philippines
- Kaltim Prima Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Central Electricity Authority - India
- Carbofer General Trading SA - India
- Therma Luzon, Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Bukit Asam (Persero) Tbk - Indonesia
- India Bulls Power Limited - India
- Semirara Mining Corp, Philippines
- CIMB Investment Bank - Malaysia
- Larsen & Toubro Limited - India
- Minerals Council of Australia
- Globalindo Alam Lestari - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Essar Steel Hazira Ltd - India
- McConnell Dowell - Australia
- Aboitiz Power Corporation - Philippines
- Salva Resources Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Riau Bara Harum - Indonesia
- Ministry of Mines - Canada
- Xindia Steels Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Oldendorff Carriers - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Barasentosa Lestari - Indonesia
- Georgia Ports Authority, United States
- Mjunction Services Limited - India
- Interocean Group of Companies - India
- Mercator Lines Limited - India
- Rashtriya Ispat Nigam Limited - India
- Kepco SPC Power Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- SN Aboitiz Power Inc, Philippines
- Mintek Dendrill Indonesia
- SMC Global Power, Philippines
- IHS Mccloskey Coal Group - USA
- Bahari Cakrawala Sebuku - Indonesia
- Indian Energy Exchange, India
- Tata Chemicals Ltd - India
- Electricity Generating Authority of Thailand
- Kideco Jaya Agung - Indonesia
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- Tamil Nadu electricity Board
- The State Trading Corporation of India Ltd
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- GVK Power & Infra Limited - India
- Rio Tinto Coal - Australia
- Malabar Cements Ltd - India
- Lanco Infratech Ltd - India
- Savvy Resources Ltd - HongKong
- Latin American Coal - Colombia
- South Luzon Thermal Energy Corporation
- Deloitte Consulting - India
- Pipit Mutiara Jaya. PT, Indonesia
- London Commodity Brokers - England
- Australian Coal Association
- Asia Pacific Energy Resources Ventures Inc, Philippines
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