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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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Friday, 13 March 15
ADARO RECORDED A 7% INCREASE IN EBITDA OF $877 MILLION IN 2014
“Coal market continues to be difficult and challenging” – Adaro Energy
The world’s Top 5 thermal coal exporter, ...
Thursday, 12 March 15
CAPESIZE : ACTIVITY IS LOW; PANAMAX: BIT MORE ACTIVITY; HANDY: A FIRMING WEEK
Handy
It has been a firming week in both hemispheres this week and especially in the Pacific, says Fearnleys AS in its week's week report.
...
Thursday, 12 March 15
COAL MINERS REMAIN UNDER PRESSURE AS GLUT CONTINUES - THE JAKARTA POST
Indonesia’s major coal miners reported a significant drop in their earnings last year as the sharp drop in the global demand, mainly from Chi ...
Thursday, 12 March 15
FOB INDONESIA COAL SWAP DROP TO $47.33 A TON IN THE WEEK ENDED MAR.6
COALspot.com: Indonesian coal swaps for delivery Q2' 2015 drop month on month and week over week.
The Q2 swap fell US$ 0.37 (0.78%) month ...
Wednesday, 11 March 15
RICHARDS BAY COAL SWAPS DROP $ 3.65 - 4.0/T W-O-W
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q2' 2015 declined month over month and week on week.
The Q2 swap has fell US$ ...
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- Indonesian Coal Mining Association
- Ambuja Cements Ltd - India
- Essar Steel Hazira Ltd - India
- Global Coal Blending Company Limited - Australia
- CIMB Investment Bank - Malaysia
- Bayan Resources Tbk. - Indonesia
- Tamil Nadu electricity Board
- Coastal Gujarat Power Limited - India
- Larsen & Toubro Limited - India
- Manunggal Multi Energi - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Lanco Infratech Ltd - India
- Toyota Tsusho Corporation, Japan
- Siam City Cement - Thailand
- TeaM Sual Corporation - Philippines
- Vizag Seaport Private Limited - India
- Straits Asia Resources Limited - Singapore
- LBH Netherlands Bv - Netherlands
- GMR Energy Limited - India
- Jindal Steel & Power Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sical Logistics Limited - India
- Mercuria Energy - Indonesia
- Metalloyd Limited - United Kingdom
- Bangladesh Power Developement Board
- Riau Bara Harum - Indonesia
- Vedanta Resources Plc - India
- Deloitte Consulting - India
- Energy Development Corp, Philippines
- Miang Besar Coal Terminal - Indonesia
- Mjunction Services Limited - India
- Meralco Power Generation, Philippines
- GVK Power & Infra Limited - India
- New Zealand Coal & Carbon
- Coal and Oil Company - UAE
- PowerSource Philippines DevCo
- Standard Chartered Bank - UAE
- Sojitz Corporation - Japan
- Power Finance Corporation Ltd., India
- Leighton Contractors Pty Ltd - Australia
- Videocon Industries ltd - India
- Meenaskhi Energy Private Limited - India
- Orica Mining Services - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- GN Power Mariveles Coal Plant, Philippines
- Indian Oil Corporation Limited
- Thiess Contractors Indonesia
- International Coal Ventures Pvt Ltd - India
- SMG Consultants - Indonesia
- Jaiprakash Power Ventures ltd
- Global Business Power Corporation, Philippines
- Banpu Public Company Limited - Thailand
- McConnell Dowell - Australia
- Gujarat Mineral Development Corp Ltd - India
- Oldendorff Carriers - Singapore
- Indogreen Group - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Kepco SPC Power Corporation, Philippines
- Economic Council, Georgia
- PTC India Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Altura Mining Limited, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Antam Resourcindo - Indonesia
- Sindya Power Generating Company Private Ltd
- GAC Shipping (India) Pvt Ltd
- Indo Tambangraya Megah - Indonesia
- Simpson Spence & Young - Indonesia
- Gujarat Sidhee Cement - India
- Globalindo Alam Lestari - Indonesia
- Sree Jayajothi Cements Limited - India
- Star Paper Mills Limited - India
- Thai Mozambique Logistica
- Wilmar Investment Holdings
- Parliament of New Zealand
- Semirara Mining Corp, Philippines
- Marubeni Corporation - India
- Bukit Asam (Persero) Tbk - Indonesia
- Rio Tinto Coal - Australia
- Global Green Power PLC Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Savvy Resources Ltd - HongKong
- PNOC Exploration Corporation - Philippines
- Ministry of Finance - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Aditya Birla Group - India
- Baramulti Group, Indonesia
- Singapore Mercantile Exchange
- Intertek Mineral Services - Indonesia
- White Energy Company Limited
- Directorate General of MIneral and Coal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Planning Commission, India
- South Luzon Thermal Energy Corporation
- Karaikal Port Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Chamber of Mines of South Africa
- Coalindo Energy - Indonesia
- Electricity Generating Authority of Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Australian Commodity Traders Exchange
- Salva Resources Pvt Ltd - India
- Anglo American - United Kingdom
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kideco Jaya Agung - Indonesia
- Formosa Plastics Group - Taiwan
- OPG Power Generation Pvt Ltd - India
- Electricity Authority, New Zealand
- Siam City Cement PLC, Thailand
- Central Java Power - Indonesia
- Georgia Ports Authority, United States
- The Treasury - Australian Government
- VISA Power Limited - India
- Bhatia International Limited - India
- Indika Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- Mercator Lines Limited - India
- Bhushan Steel Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Dalmia Cement Bharat India
- Petron Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Directorate Of Revenue Intelligence - India
- Kaltim Prima Coal - Indonesia
- SN Aboitiz Power Inc, Philippines
- Bharathi Cement Corporation - India
- Borneo Indobara - Indonesia
- Mintek Dendrill Indonesia
- Maheswari Brothers Coal Limited - India
- Malabar Cements Ltd - India
- Africa Commodities Group - South Africa
- Independent Power Producers Association of India
- AsiaOL BioFuels Corp., Philippines
- Trasteel International SA, Italy
- Kartika Selabumi Mining - Indonesia
- Commonwealth Bank - Australia
- Kapuas Tunggal Persada - Indonesia
- Sinarmas Energy and Mining - Indonesia
- London Commodity Brokers - England
- Posco Energy - South Korea
- Ministry of Transport, Egypt
- Bukit Makmur.PT - Indonesia
- San Jose City I Power Corp, Philippines
- The State Trading Corporation of India Ltd
- Heidelberg Cement - Germany
- Neyveli Lignite Corporation Ltd, - India
- Wood Mackenzie - Singapore
- India Bulls Power Limited - India
- MS Steel International - UAE
- Jorong Barutama Greston.PT - Indonesia
- Renaissance Capital - South Africa
- Therma Luzon, Inc, Philippines
- CNBM International Corporation - China
- Pendopo Energi Batubara - Indonesia
- Edison Trading Spa - Italy
- Energy Link Ltd, New Zealand
- Bulk Trading Sa - Switzerland
- Eastern Energy - Thailand
- Krishnapatnam Port Company Ltd. - India
- Cement Manufacturers Association - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kalimantan Lumbung Energi - Indonesia
- European Bulk Services B.V. - Netherlands
- Uttam Galva Steels Limited - India
- Attock Cement Pakistan Limited
- Interocean Group of Companies - India
- ASAPP Information Group - India
- Kumho Petrochemical, South Korea
- IHS Mccloskey Coal Group - USA
- Port Waratah Coal Services - Australia
- Orica Australia Pty. Ltd.
- Binh Thuan Hamico - Vietnam
- Samtan Co., Ltd - South Korea
- Ceylon Electricity Board - Sri Lanka
- Ind-Barath Power Infra Limited - India
- Bhoruka Overseas - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Tata Chemicals Ltd - India
- Goldman Sachs - Singapore
- Ministry of Mines - Canada
- Central Electricity Authority - India
- Medco Energi Mining Internasional
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Carbofer General Trading SA - India
- Latin American Coal - Colombia
- Rashtriya Ispat Nigam Limited - India
- Madhucon Powers Ltd - India
- Makarim & Taira - Indonesia
- SMC Global Power, Philippines
- Merrill Lynch Commodities Europe
- Sakthi Sugars Limited - India
- Aboitiz Power Corporation - Philippines
- IEA Clean Coal Centre - UK
- Parry Sugars Refinery, India
- Bahari Cakrawala Sebuku - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- ICICI Bank Limited - India
- Xindia Steels Limited - India
- Price Waterhouse Coopers - Russia
- Indian Energy Exchange, India
- Bukit Baiduri Energy - Indonesia
- Grasim Industreis Ltd - India
- Timah Investasi Mineral - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Agrawal Coal Company - India
- Australian Coal Association
- Minerals Council of Australia
- Chettinad Cement Corporation Ltd - India
- Sarangani Energy Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Eastern Coal Council - USA
- Cigading International Bulk Terminal - Indonesia
- The University of Queensland
- Romanian Commodities Exchange
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