Jinhui shares on hold for fleet news

PUBLISHED : Wednesday, 09 August, 2006, 12:00am
UPDATED : Wednesday, 09 August, 2006, 12:00am

Trading in shares of Jinhui Holdings was suspended in Hong Kong yesterday as the bulk shipping firm prepared to announce a fleet expansion that may be worth HK$455 million to capitalise on growing demand for raw materials such as iron ore and coal.

The company's majority-held arm, Jinhui Shipping and Transportation, agreed to buy two six-year-old handymax bulk vessels from separate owners in Europe and Asia for an aggregate price of US$58.5 million, according to brokers. The purchases will add to a fleet of nine handymax vessels. Five new ships are due for delivery between next year and 2008.

A senior executive of the parent firm, which requested the trading suspension pending announcement of a 'major transaction regarding the acquisition of a vessel', declined to confirm the broker's information yesterday.

Newer handysize ships, typically in the 40,000 to 50,000 deadweight-tonne (dwt) range, fetch a premium compared with other classes of vessels.

They primarily call at secondary ports where water depths may restrict the use of larger vessels.

The order book for handymaxes and their slightly larger handysize cousins is thin, with larger panamax and capesize vessels offering busy shipyards a better margin, according to brokers.

'Apart from Japan Inc and a few new yards in south and Southeast Asia, there are few shipbuilders keen to build handysize, with much greater returns in larger vessels and other sectors to be achieved,' broker J.E. Hyde said in its Market Outlook 2006.

'Handysize second-hand prices have been the most resilient [in the past year] of all sectors, with owners reluctant to part with vessels which they believe, due to their scarcity, offer good long-term prospects.'

Brokers say Jinhui agreed to buy the 2000-built Nord Glimt, a 50,236 dwt vessel from Norwegian owners Norden Dampskibsselskabet for US$32.5 million.

Jinhui paid Japan's Nishin Shipping US$26 million for the 48,000 dwt Arram Trader.

Jinhui's shares fell about 1 per cent to HK$1.88 at Monday's close.