China Rongsheng Heavy Industries, the mainland's largest privately controlled shipbuilder, is a step closer to meeting its order target of US$2.5 billion this year after securing a deal to build up to 20 oil tankers for a mainland shipping company.
The contract was inked with Global Union Shipping, a previously unknown company that industry sources said was linked to a state-owned enterprise which has a long-term oil transport contract.
Under the pact with the shipbuilder, Global Union has ordered 10 157,000 deadweight tonne (dwt) Suezmax tankers with an option for 10 sister vessels.
No details of the purchase price were given, but British shipbroking house Clarkson said a typical 157,000-dwt Suezmax tanker cost US$61 million. This would put the value of the initial order at US$610 million, rising to US$1.2 billion if options for the other 10 vessels were exercised.
China Rongsheng said the latest order from Global Union took its total order book so far this year to more than 40 ships with a total contract value of more than US$2 billion. By comparison, the shipbuilder had won contracts worth about US$1.4 billion for 31 ships up to end of September.
The latest Suezmax tankers are to be delivered between the end of 2013 and in 2014.
China Rongsheng president Chen Qiang said: 'The new order not only boosts the group's order book, but also consolidates our leading position in the global Suezmax shipbuilding market.'
The company has delivered 30 Suezmax tankers since it was established six years ago, making it the largest Suezmax shipbuilder in China and the second biggest in the world.
But the size of the new order has caused consternation in shipping circles. One Hong Kong shipbroker said the Global Union deal would increase the global order backlog for Suezmax tankers to 144 ships if all 20 vessels were contracted.
This is equivalent to 36 per cent of the 426 ships already in service, according to Clarkson. Spot charter rates for the tankers, which are typically restricted to four main trade lanes, including from the Middle East to southern China and from West Africa to the United States or Mediterranean, have already halved in the past year. After commanding an average charter rate of US$31,259 per day last year, daily lease rates for a Suezmax tanker now average US$16,880, largely because there are too many ships for available cargoes.
Shipbroking sources were also trying to assess whether the Global Union contract was part of the mainland's commitment to have 50 per cent of its oil imports carried on Chinese-owned or controlled tonnage by 2015.