• Thu
  • Oct 30, 2014
  • Updated: 11:33pm

Industrial shipowners may squeeze charter deals

PUBLISHED : Saturday, 23 April, 2011, 12:00am
UPDATED : Saturday, 23 April, 2011, 12:00am

The rise of industrial shipowners including iron ore miners Rio Tinto and Vale coupled with the growth of long-term contract deals between steelmakers and shipowners could squeeze the volume of charter contracts open to dry bulk shipowners.

Newbuilding statistics from British shipbroking house Clarkson show 353 capesize dry bulk cargo ships totalling almost 70.8 million deadweight tonnes are on order, of which 137 are more than 200,000 dwt.

At least 57 of these ultra large capesize vessels are directly linked to cargo-owning shipowners, including 31 that are destined to support Vale's mining operations. This number includes eight 400,000 dwt vessels ordered by South Korea's STX Pan Ocean that will be on long-term charter to Vale.

The orders include eight 205,000 dwt ships for Rio Tinto built by Hanjin Heavy Industries and Construction at Subic Bay in the Philippines and a brace of similar ships for India's Tata Power at China's Beihai Shipyard.

Rizhao Steel is also having six 180,000 dwt capesize ships built at Dalian Shipbuilding and Shanghai Waigaoqiao Shipbuilding.

Other industrial shipowners with ships on order include Hong Kong commodities company Noble Group, China's Baosteel, Indian steelmaker ArcelorMittal and Taiwan Power.

Shipowners such as Shanghai Time Shipping, co-owned by China Shipping (Group) and Huaneng Power International, and Japan's NS United Kaiun Kaisha, part-owned by Nippon Steel Shipping, are also closely linked to commodity end users.

Kenneth Koo Chee-kong, chairman of Hong Kong-headquartered ship owner Tai Chong Cheang Steamship, said the Vale ships could transport 30 per cent to 40 per cent of the iron ore exported from Brazil to China.

The typical 45-day voyage from Tubarao in southern Brazil to Shanghai or Rizhao is the 'money-making route' for shipowners, Koo said because it is one of the longest global transits for merchant shipping. He questioned what would happen to independent shipowners after Vale introduced all its own tonnage on the route.

'I still feel there are niches for 180,000 dwt capesizes,' Koo said. He added these included routes from Richards Bay, a coal and iron ore port in South Africa, while several ports in China and Japan had restrictions on ships with drafts of 20 to 22 metres.

Pointing to the rise of industrial shipowners in recent years, Nigel Anton, head of shipping finance at Standard Chartered Bank, said about 1 per cent of orders received by STX before 2007 came from this sector. This surged to 10 per cent after 2007.

While Anton was unable to estimate the cargo volumes handled by industrial ship owners, he said more cargo owners would venture into shipowning.

He said 'banks like the story' and would finance ships ordered by industrial shipowners because 'there was predictability of cash flows' and 'guaranteed employment' for these ships. Standard Chartered has already agreed to lease deals for several of the ships ordered by Noble.

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