Shanghai yard wins huge order from U-Ming

PUBLISHED : Tuesday, 14 February, 2012, 12:00am
UPDATED : Tuesday, 14 February, 2012, 12:00am


Shanghai Waigaoqiao Shipbuilding, one of the largest shipyards on the mainland, has won a contract that may be worth up to US$500 million.

The huge order, for up to 10 dry cargo iron ore and coal carriers, was placed yesterday by the Singapore subsidiary of Taiwan's U-Ming Marine Transport.

The deal, signed between U-Ming president Ong Choo Kiat and SWS president Wang Qi, comprised a firm order for four 186,300 dwt capesize dry bulk ships, plus options for six more. The ships, each costing US$49.83 million, are due for delivery from 2014.

One Hong Kong-based shipbroker confirmed the order was the first major order to a mainland shipyard this year.

'It also shows Taiwanese owners are not afraid of ordering at a mainland shipbuilder. Previously, an order like this would have gone to a Taiwanese shipbuilder,' the broker said.

U-Ming said the ships would be equipped with fuel-efficient engines and other pollution-reducing equipment, with a new hull design that would help reduce carbon emissions.

The broker said the deal showed commercial considerations outweighed political issues, with U-Ming negotiating a competitive price for the latest environmentally friendly specification.

U-Ming is no stranger to SWS. It is part owner, with Wah Kwong Maritime Transport, of a 177,000 dwt capesize bulk carrier that was built by the Shanghai shipyard in 2010.

The new ships will be entirely owned by U-Ming.

Ong said the ships were part of a fleet expansion and replacement programme that was being implemented, despite the downturn in the dry bulk market caused by new tonnage coming on stream.

British shipbroker Clarkson estimates 401 capesize vessels totalling 81.1 million dwt are set for delivery in the next four years.

This is equivalent to 32.4 per cent of the global fleet. Most of these ships, totalling 52.1 million dwt, are to be delivered this year.

Last year, combined iron ore and coal imports in key economies such as China, South Korea and Europe grew 12.2 per cent. A 6 per cent increase in iron ore imports to 703 million tonnes has been forecast for China this year.

Ong said the ships had been ordered for delivery in 2014 'to skip the expected market downturn during 2012-13'.

He said the oversupply of large dry bulk ships would ease as more older ships would be scrapped because of high scrap prices, and capesize vessel deliveries would peak this year.

Ong said the expected rise in iron ore production in Brazil, Australia and other major producers would increase demand for coal, and China's continued urbanisation under its 12th five-year plan would 'lead to better market sentiment in 2014'.