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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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Monday, 08 January 24
KOSPO TO BUY 80000 MT OF INDONESIAN LOW CALORIFIC VALUE COAL FOR FEB 2024
Korea Southern Power Co., Ltd. (KOSPO), is inviting bids for the supply of Indonesian Low Calorific Value Coal from qualified suppliers for Korean ...
Monday, 08 January 24
SEABORNE TRADE REACHES 12.4BN TONNES - CLARKSONS
China will establish a back-up coal production system by 2027 to stabilise prices and secure coal supply, the state planner said on Wednesday, even ...
Monday, 08 January 24
CAPESIZES START THE NEW YEAR ON POSITIVE NOTE - BALTIC EXCHANGE
Capesize
This week the capsize market has been marked by a mix of activities and challenges. Despite a slow start following the Christmas and N ...
Friday, 05 January 24
MORGAN STANLEY SEES LOWER OIL PRICES IN 2024 ON OVERSUPPLY CONCERNS - REUTERS
Morgan Stanley sees Brent crude prices anchored near $80 per barrel in the first half in 2024 before declining towards the end of the year as it ex ...
Friday, 05 January 24
INDIA'S COAL OUTPUT RISES NEARLY 11 PC IN DEC TO 92.87 MT - PTI
India’s coal production increased by 10.75 per cent to 92.87 million tonne in December 2023 as compared to the year-ago period, an official s ...
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- Ceylon Electricity Board - Sri Lanka
- Siam City Cement - Thailand
- Bayan Resources Tbk. - Indonesia
- VISA Power Limited - India
- Singapore Mercantile Exchange
- Meenaskhi Energy Private Limited - India
- Gujarat Sidhee Cement - India
- Standard Chartered Bank - UAE
- Georgia Ports Authority, United States
- ASAPP Information Group - India
- Jaiprakash Power Ventures ltd
- Globalindo Alam Lestari - Indonesia
- Coal and Oil Company - UAE
- GAC Shipping (India) Pvt Ltd
- Madhucon Powers Ltd - India
- SMC Global Power, Philippines
- Cement Manufacturers Association - India
- Bharathi Cement Corporation - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- ICICI Bank Limited - India
- Mintek Dendrill Indonesia
- Larsen & Toubro Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Planning Commission, India
- Chettinad Cement Corporation Ltd - India
- Indo Tambangraya Megah - Indonesia
- Central Electricity Authority - India
- Holcim Trading Pte Ltd - Singapore
- Aboitiz Power Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Essar Steel Hazira Ltd - India
- Indian Energy Exchange, India
- Maheswari Brothers Coal Limited - India
- London Commodity Brokers - England
- Mercuria Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Coal Council - USA
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Coalindo Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Malabar Cements Ltd - India
- Mjunction Services Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Wilmar Investment Holdings
- India Bulls Power Limited - India
- Semirara Mining and Power Corporation, Philippines
- New Zealand Coal & Carbon
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Therma Luzon, Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Latin American Coal - Colombia
- Toyota Tsusho Corporation, Japan
- Global Business Power Corporation, Philippines
- PTC India Limited - India
- Bhatia International Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Thiess Contractors Indonesia
- Global Green Power PLC Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Indian Oil Corporation Limited
- Leighton Contractors Pty Ltd - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Electricity Authority, New Zealand
- Ambuja Cements Ltd - India
- Coastal Gujarat Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Asmin Koalindo Tuhup - Indonesia
- Xindia Steels Limited - India
- Petron Corporation, Philippines
- Carbofer General Trading SA - India
- Jindal Steel & Power Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- The State Trading Corporation of India Ltd
- Electricity Generating Authority of Thailand
- Pendopo Energi Batubara - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Aditya Birla Group - India
- Heidelberg Cement - Germany
- Ind-Barath Power Infra Limited - India
- San Jose City I Power Corp, Philippines
- Economic Council, Georgia
- Miang Besar Coal Terminal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- TNB Fuel Sdn Bhd - Malaysia
- The University of Queensland
- Bukit Makmur.PT - Indonesia
- Energy Development Corp, Philippines
- Anglo American - United Kingdom
- Barasentosa Lestari - Indonesia
- Kobexindo Tractors - Indoneisa
- Cigading International Bulk Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Posco Energy - South Korea
- Romanian Commodities Exchange
- Star Paper Mills Limited - India
- Orica Mining Services - Indonesia
- Central Java Power - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kumho Petrochemical, South Korea
- Edison Trading Spa - Italy
- Jorong Barutama Greston.PT - Indonesia
- South Luzon Thermal Energy Corporation
- IHS Mccloskey Coal Group - USA
- Tamil Nadu electricity Board
- Thai Mozambique Logistica
- Karbindo Abesyapradhi - Indoneisa
- GVK Power & Infra Limited - India
- McConnell Dowell - Australia
- Attock Cement Pakistan Limited
- Trasteel International SA, Italy
- Altura Mining Limited, Indonesia
- IEA Clean Coal Centre - UK
- Dalmia Cement Bharat India
- MS Steel International - UAE
- Kepco SPC Power Corporation, Philippines
- Interocean Group of Companies - India
- Lanco Infratech Ltd - India
- Intertek Mineral Services - Indonesia
- Africa Commodities Group - South Africa
- Uttam Galva Steels Limited - India
- Sical Logistics Limited - India
- Kartika Selabumi Mining - Indonesia
- Kaltim Prima Coal - Indonesia
- Borneo Indobara - Indonesia
- Energy Link Ltd, New Zealand
- Banpu Public Company Limited - Thailand
- Eastern Energy - Thailand
- Ministry of Transport, Egypt
- Sojitz Corporation - Japan
- Marubeni Corporation - India
- Baramulti Group, Indonesia
- Wood Mackenzie - Singapore
- Indonesian Coal Mining Association
- Mercator Lines Limited - India
- Manunggal Multi Energi - Indonesia
- Riau Bara Harum - Indonesia
- Independent Power Producers Association of India
- The Treasury - Australian Government
- Formosa Plastics Group - Taiwan
- PowerSource Philippines DevCo
- Antam Resourcindo - Indonesia
- Australian Coal Association
- Price Waterhouse Coopers - Russia
- Medco Energi Mining Internasional
- Gujarat Mineral Development Corp Ltd - India
- CIMB Investment Bank - Malaysia
- Metalloyd Limited - United Kingdom
- Sinarmas Energy and Mining - Indonesia
- Port Waratah Coal Services - Australia
- Commonwealth Bank - Australia
- Kalimantan Lumbung Energi - Indonesia
- Savvy Resources Ltd - HongKong
- LBH Netherlands Bv - Netherlands
- Chamber of Mines of South Africa
- Goldman Sachs - Singapore
- Sakthi Sugars Limited - India
- Kapuas Tunggal Persada - Indonesia
- Power Finance Corporation Ltd., India
- Simpson Spence & Young - Indonesia
- Bangladesh Power Developement Board
- Ministry of Mines - Canada
- Videocon Industries ltd - India
- Australian Commodity Traders Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- TeaM Sual Corporation - Philippines
- Merrill Lynch Commodities Europe
- White Energy Company Limited
- Bhushan Steel Limited - India
- Grasim Industreis Ltd - India
- Semirara Mining Corp, Philippines
- Indika Energy - Indonesia
- Renaissance Capital - South Africa
- Agrawal Coal Company - India
- OPG Power Generation Pvt Ltd - India
- Deloitte Consulting - India
- Rio Tinto Coal - Australia
- Sindya Power Generating Company Private Ltd
- Directorate Of Revenue Intelligence - India
- Minerals Council of Australia
- Ministry of Finance - Indonesia
- Bukit Baiduri Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Parry Sugars Refinery, India
- Kideco Jaya Agung - Indonesia
- Vizag Seaport Private Limited - India
- Vedanta Resources Plc - India
- Bhoruka Overseas - Indonesia
- GMR Energy Limited - India
- International Coal Ventures Pvt Ltd - India
- Indogreen Group - Indonesia
- Makarim & Taira - Indonesia
- Siam City Cement PLC, Thailand
- Neyveli Lignite Corporation Ltd, - India
- PNOC Exploration Corporation - Philippines
- Parliament of New Zealand
- CNBM International Corporation - China
- Karaikal Port Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Krishnapatnam Port Company Ltd. - India
- Alfred C Toepfer International GmbH - Germany
- Orica Australia Pty. Ltd.
- SMG Consultants - Indonesia
- Sarangani Energy Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sree Jayajothi Cements Limited - India
- Straits Asia Resources Limited - Singapore
- Binh Thuan Hamico - Vietnam
- Billiton Holdings Pty Ltd - Australia
- Oldendorff Carriers - Singapore
- Meralco Power Generation, Philippines
- SN Aboitiz Power Inc, Philippines
- Tata Chemicals Ltd - India
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