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China Shipping will splash out US$2.2b on a fleet of gas carriers and ultra-large container ships .

China Shipping orders five 18,000 teu monsters

The second-largest shipping group on the mainland is buying five 18,000 teu vessels, the biggest in the world, in US$2.2b splash

Keith Wallis

China Shipping, the mainland's second-biggest shipping group, is set to splash out US$2.2 billion on a fleet of gas carriers and ultra-large container ships capable of carrying 18,000 20-foot containers.

China Shipping Container Lines (CSCL) will become only the second box line globally, after the Danish shipping giant Maersk, to operate the 18,000 teu (20-foot equivalent unit) monsters, which will be the biggest container ships in the world. Maersk is due to take delivery of its first 18,000 teu Triple-E ship on June 28.

The South Korean shipbuilding giant Hyundai Heavy Industries has won the bid to build the massive container ships and discussions are taking place between CSCL and Hyundai to finalise shipbuilding contracts for five vessels. China Shipping management agreed to the order at a board meeting last Sunday. The container ships will be deployed on the Asia-Europe route.

Martin Rowe, the managing director of Clarksons Asia in Hong Kong, estimated each ship would cost in "the region of US$130 million to US$140 million", depending on specifications.

South Korean shipbuilding sources confirmed China Shipping had placed the order with Hyundai and dismissed maritime trade paper speculation that negotiations were taking place with rivals Daewoo Shipbuilding and Samsung Heavy Industries.

An insider at Daewoo Shipbuilding and Marine Engineering said: "We did participate [in the bid] but it wasn't enough to win."

Hyundai has already set up a China Shipping group within its container ship sales team to handle its involvement in the project.

China Shipping Development, in partnership with Japan's Mitsui OSK Lines, has also confirmed a US$1.51 billion order with Shanghai's Hudong-Zhonghua Shipbuilding for six liquefied natural gas carriers. The ships, with a capacity of 174,000 cubic metres, will by used by Sinopec to transport LNG from its Australia Pacific LNG project in Queensland to China, starting in 2016.

Alastair MacAulay, a partner in the law firm Mayer Brown JSM, said the firm's offices in Hong Kong and Beijing, with help from Shanghai, acted for China Shipping Development and Mitsui OSK Lines on the acquisition, financing and chartering of the ships to Sinopec.

China Shipping and Mitsui OSK Lines will provide 20 per cent of the financing for the ships, while a Sino-Japanese banking syndicate including ICBC, Bank of China, Export-Import Bank of China and Sumitomo Mitsui Banking will provide the remaining 80 per cent, equivalent to US$1.2 billion.

MacAulay said the latest pact "is a new and separate deal" from one in 2011 when China Shipping and Mitsui OSK Lines ordered four LNG carriers from Hudong-Zhonghua Shipbuilding.

This article appeared in the South China Morning Post print edition as: China Shipping orders giant freight carriers
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