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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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Thursday, 02 April 15
NEWBUILDING ORDERS FOR DRY BULK CARRIERS "DRY" UP
Newbuilding ordering activity remained subdued over the course of the past week, as ship owners are wary of adding further tonnage to an already pr ...
Wednesday, 01 April 15
SUPRAMAX & HANDY: RATES HELD STEADY TOWARDS THE WEEKEND
“Despite the fact that the Dry Bulk market closed off on the green last week, sentiment didn't improve by any means, not only because of ...
Wednesday, 01 April 15
WEEKLY SHIPPING MARKET UPDATE - INTERMODAL
There is no doubt that we are still witnessing a very challenging and at the same time very uncertain market, both with respect to dry chartering a ...
Wednesday, 01 April 15
Q4' 15 INDONESIA COAL SWAP CLOSED AT $45.15 W/E 27 MARCH 2015
COALspot.com: Indonesian coal swap for delivery Q2' 2015 drops month on month and week over week.
The Q2 swap declined US$ 1.54 (3.24%) mo ...
Tuesday, 31 March 15
RICHARDS BAY COAL SWAPS GAIN WEEK OVER WEEK
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q2' 2015 declined month over month but increased week on week.
The Q2 swap has ...
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- Vizag Seaport Private Limited - India
- Wilmar Investment Holdings
- Baramulti Group, Indonesia
- Tamil Nadu electricity Board
- Metalloyd Limited - United Kingdom
- Independent Power Producers Association of India
- SMC Global Power, Philippines
- GN Power Mariveles Coal Plant, Philippines
- SMG Consultants - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Ministry of Mines - Canada
- Orica Mining Services - Indonesia
- Mercuria Energy - Indonesia
- Formosa Plastics Group - Taiwan
- Rashtriya Ispat Nigam Limited - India
- Bukit Baiduri Energy - Indonesia
- Sojitz Corporation - Japan
- Siam City Cement - Thailand
- Star Paper Mills Limited - India
- CIMB Investment Bank - Malaysia
- Videocon Industries ltd - India
- Malabar Cements Ltd - India
- Sree Jayajothi Cements Limited - India
- Holcim Trading Pte Ltd - Singapore
- Minerals Council of Australia
- Manunggal Multi Energi - Indonesia
- Siam City Cement PLC, Thailand
- Tata Chemicals Ltd - India
- Bhoruka Overseas - Indonesia
- Semirara Mining and Power Corporation, Philippines
- CNBM International Corporation - China
- Salva Resources Pvt Ltd - India
- Planning Commission, India
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- AsiaOL BioFuels Corp., Philippines
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- Kapuas Tunggal Persada - Indonesia
- Central Electricity Authority - India
- Global Green Power PLC Corporation, Philippines
- Deloitte Consulting - India
- Coalindo Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Thiess Contractors Indonesia
- Sakthi Sugars Limited - India
- Eastern Energy - Thailand
- Bulk Trading Sa - Switzerland
- South Luzon Thermal Energy Corporation
- Eastern Coal Council - USA
- Marubeni Corporation - India
- Kumho Petrochemical, South Korea
- Makarim & Taira - Indonesia
- Ind-Barath Power Infra Limited - India
- PNOC Exploration Corporation - Philippines
- TeaM Sual Corporation - Philippines
- Pendopo Energi Batubara - Indonesia
- Uttam Galva Steels Limited - India
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- Krishnapatnam Port Company Ltd. - India
- Dalmia Cement Bharat India
- Leighton Contractors Pty Ltd - Australia
- Altura Mining Limited, Indonesia
- Economic Council, Georgia
- Standard Chartered Bank - UAE
- Asmin Koalindo Tuhup - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Banpu Public Company Limited - Thailand
- Commonwealth Bank - Australia
- Global Coal Blending Company Limited - Australia
- Barasentosa Lestari - Indonesia
- Kepco SPC Power Corporation, Philippines
- Coal and Oil Company - UAE
- Australian Commodity Traders Exchange
- Kohat Cement Company Ltd. - Pakistan
- Gujarat Electricity Regulatory Commission - India
- Goldman Sachs - Singapore
- Iligan Light & Power Inc, Philippines
- Indian Oil Corporation Limited
- Lanco Infratech Ltd - India
- Edison Trading Spa - Italy
- Maheswari Brothers Coal Limited - India
- Toyota Tsusho Corporation, Japan
- Orica Australia Pty. Ltd.
- Kaltim Prima Coal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Power Finance Corporation Ltd., India
- Vedanta Resources Plc - India
- Simpson Spence & Young - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Meenaskhi Energy Private Limited - India
- The State Trading Corporation of India Ltd
- New Zealand Coal & Carbon
- Bukit Asam (Persero) Tbk - Indonesia
- Merrill Lynch Commodities Europe
- Xindia Steels Limited - India
- Sinarmas Energy and Mining - Indonesia
- Thai Mozambique Logistica
- Essar Steel Hazira Ltd - India
- MS Steel International - UAE
- Bhatia International Limited - India
- McConnell Dowell - Australia
- Chettinad Cement Corporation Ltd - India
- Indika Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Antam Resourcindo - Indonesia
- Oldendorff Carriers - Singapore
- Aboitiz Power Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- VISA Power Limited - India
- ICICI Bank Limited - India
- Energy Link Ltd, New Zealand
- International Coal Ventures Pvt Ltd - India
- Meralco Power Generation, Philippines
- Mintek Dendrill Indonesia
- Georgia Ports Authority, United States
- Sindya Power Generating Company Private Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhushan Steel Limited - India
- Semirara Mining Corp, Philippines
- Bangladesh Power Developement Board
- Ministry of Transport, Egypt
- Billiton Holdings Pty Ltd - Australia
- Grasim Industreis Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Singapore Mercantile Exchange
- San Jose City I Power Corp, Philippines
- Africa Commodities Group - South Africa
- Romanian Commodities Exchange
- Larsen & Toubro Limited - India
- Ministry of Finance - Indonesia
- Mjunction Services Limited - India
- Renaissance Capital - South Africa
- Globalindo Alam Lestari - Indonesia
- Bayan Resources Tbk. - Indonesia
- Parliament of New Zealand
- Intertek Mineral Services - Indonesia
- Petron Corporation, Philippines
- IEA Clean Coal Centre - UK
- Jaiprakash Power Ventures ltd
- Cement Manufacturers Association - India
- Kobexindo Tractors - Indoneisa
- GVK Power & Infra Limited - India
- Price Waterhouse Coopers - Russia
- The University of Queensland
- White Energy Company Limited
- Sarangani Energy Corporation, Philippines
- Australian Coal Association
- Ambuja Cements Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Borneo Indobara - Indonesia
- Wood Mackenzie - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Bukit Makmur.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- GMR Energy Limited - India
- Straits Asia Resources Limited - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Parry Sugars Refinery, India
- Miang Besar Coal Terminal - Indonesia
- ASAPP Information Group - India
- India Bulls Power Limited - India
- Energy Development Corp, Philippines
- Chamber of Mines of South Africa
- PetroVietnam Power Coal Import and Supply Company
- GAC Shipping (India) Pvt Ltd
- LBH Netherlands Bv - Netherlands
- PTC India Limited - India
- Samtan Co., Ltd - South Korea
- Coastal Gujarat Power Limited - India
- Interocean Group of Companies - India
- IHS Mccloskey Coal Group - USA
- SN Aboitiz Power Inc, Philippines
- Central Java Power - Indonesia
- Electricity Generating Authority of Thailand
- Carbofer General Trading SA - India
- Electricity Authority, New Zealand
- Gujarat Sidhee Cement - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Attock Cement Pakistan Limited
- Timah Investasi Mineral - Indoneisa
- Posco Energy - South Korea
- Indogreen Group - Indonesia
- European Bulk Services B.V. - Netherlands
- The Treasury - Australian Government
- Karaikal Port Pvt Ltd - India
- Indonesian Coal Mining Association
- Kalimantan Lumbung Energi - Indonesia
- Agrawal Coal Company - India
- Petrochimia International Co. Ltd.- Taiwan
- Anglo American - United Kingdom
- Madhucon Powers Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- PowerSource Philippines DevCo
- Directorate Of Revenue Intelligence - India
- London Commodity Brokers - England
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Binh Thuan Hamico - Vietnam
- Indian Energy Exchange, India
- Alfred C Toepfer International GmbH - Germany
- Rio Tinto Coal - Australia
- Sical Logistics Limited - India
- Riau Bara Harum - Indonesia
- Trasteel International SA, Italy
- Latin American Coal - Colombia
- Medco Energi Mining Internasional
- Therma Luzon, Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Aditya Birla Group - India
- Jindal Steel & Power Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
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- Bharathi Cement Corporation - India
- Global Business Power Corporation, Philippines
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