China Rongsheng Heavy Industries signs US$1b shipbuilding contract

China Rongsheng Heavy Industries Group Holdings, one of the biggest shipbuilders in the country, signed a US$1 billion contract with a European shipowner to build up to 36 bulk carriers within the next three years, thanks in part to a strong global shipping market.

Of the total, 24 are confirmed orders and 12 are optional in that the shipowner can buy them at a fixed price in the future to hedge against unpredictable spikes in ship prices. The buyer can also choose not to buy if shipping rates go down.

Among the 24 confirmed orders, 18 were signed by Rongsheng last year at a lower price, but the terms were renegotiated at a higher order price given the robust status of the dry bulk shipping market.

Rongsheng refused to disclose the identity of the buyer.

Global shipping has rebounded this year on the back of strong demand from shipowners, in sharp contrast to previous years when demand was sluggish and pricing for new ships kept declining.

In the first quarter, new orders by Chinese shipbuilders have grown 170 per cent from a year earlier, among which 96 per cent were from foreign buyers, according to the China Association of the National Shipbuilding Industry.