Coscon agrees on US$520m order for four of the biggest container vessels ever from a mainland yard China's nascent shipbuilding industry has entered a new era with an arm of China Ocean Shipping Group (Cosco) preparing to spend up to US$520 million for the four biggest container vessels ever ordered at a mainland yard. Cosco Container Lines (Coscon), which is expected to try to raise up to US$2 billion in a listing in Hong Kong later this year, has agreed to order four 10,000 20-foot equivalent unit (teu) capacity box ships from Nantong Cosco KHI Ship Engineering near Shanghai, according to a Cosco executive. The deal is seen as proof that the rush of foreign and domestic capital into the country's shipbuilding sector in the past five years is paying dividends. But rampant ordering - Coscon has booked 80,000 teu in the past four months - will fuel fears the hugely cyclical industry is set for a downturn. 'It is very exciting. These are some of the biggest, if not the biggest, container ships ever built and the order is coming from a premier Chinese client,' said Martin Rowe, a director for global ship broker Simpson, Spence and Young, adding such an order would not have been considered five years ago. According to broker Clarkson, the global order book was a record 4.1 million teu as of last month, or about 56 per cent of the present fleet, up from 52 per cent in March. Concerns about the size of the book extended this year's contract negotiating season on the Pacific, as key US buyers such as Wal-Mart Stores and Home Depot tried to leverage the pending capacity influx into cheaper freight rates despite double-digit volume growth on eastbound trade. Citigroup's chief transport analyst in Asia, Charles de Trenck, a noted bear, warned last month the industry was in a 'freight bubble' that was about to burst. 'The mind-numbing 54 to 56 per cent of the container fleet on order continues to point to the cyclical exit door for us,' his report said. Nevertheless, carriers are using low interest rates and swollen bank accounts after a three-year profit run to renew and expand. The Cosco executive would not disclose the price of the vessels yesterday. Brokers estimated they would cost US$125 million to US$130 million per ship. Nantong Cosco is a US$240 million joint venture set up in 1999 by Cosco and Kawasaki Heavy Industries, using the technology of its Japanese partner to become China's most advanced yard. It was the first mainland shipyard to build big car carriers for export and boasts China's fastest turnaround times for very large crude carriers - typically 150,000 to 320,000 deadweight tonnes. However, because the order is domestic, it is thought Nantong Cosco will remain outside the shipbuilding big leagues until more orders come from overseas. 'It's another stage [in the shipyard's progress],' said a Hong Kong-based broker. 'It's a domestic order but, if you look at how Korea became the dominant [liquefied natural gas] builders, they started with domestic orders. This is a step in that direction.' Coscon in January ordered four 10,000-teu vessels from South Korea's Hyundai Heavy Industries for about the same price and delivery in 2007. Coscon, the world's No7 container carrier by fleet size, is aggressively expanding to keep pace with China's manufactured exports. It is battling China Shipping Group - whose spin-off China Shipping Container Lines debuted in Hong Kong last year - for the title of the mainland's biggest shipping line. Coscon had almost 192,000 teu in capacity on order at global shipyards before the Nantong order, according to industry website CI Online. Rival CSCL's order book is at 241,000 teu and both are in the top five in terms of capacity on order.