China Shipping buys five vessels for HK$2.7b

PUBLISHED : Friday, 24 December, 2010, 12:00am
UPDATED : Friday, 24 December, 2010, 12:00am

China Shipping Development, the mainland's largest oil and coal shipping group, has ordered five vessels worth HK$2.7 billion from China Shipbuilding & Offshore International and Dalian Shipbuilding Industry, banking on strong domestic demand for energy.

It said 80 per cent of the purchase price would come from bank borrowings and 20 per cent from internal financial resources.

China Shipping has been beefing up capacity. In August it ordered four bulk vessels for HK$833.5 million to be built by Tianjin Zhonghai Huarun and Bohai Shipbuilding Heavy Industry.

The company said the latest investment reflected its confidence in sustained demand for imported crude oil, international refined oil and domestic coal for the foreseeable future.

'The tankers and bulk vessels will enable the company to take advantage of the business opportunities in the shipping market, improve its operating efficiency and profitability,' it said in a document filed with the Hong Kong Stock Exchange.

The latest orders include two very large crude oil carriers (VLCCs) for HK$1.48 billion and three tankers, each 110,000 dead weight tonnes, for HK$1.24 billion.

The first of the two VLCCs will be delivered by June 2013, and the delivery of the other three tankers will not be later than December 2012.

The price of the VLCCs will be payable in US dollars, which means the shipping company could reap an exchange gain if the yuan continues to appreciate.

However, the price of the three tankers and the four bulk vessels purchased in August will be settled in yuan.

'It is a matter of give and take during the negotiation between the ship owner and shipyard over the terms of the vessel contracts,' said a shipping veteran.

'Shipowners always want the ship price to be settled in dollars, while the shipyard wants to use yuan because of the currency's strength.'