This week sees me in Shanghai, China, attending the biennial Marintec exhibition.
The exhibition epitomises the phrase 'East meets West' with four halls devoted almost solely to Asian-owned companies and another four devoted to the rest of the world.
A cursory look at the statistics underpinning China's tanker newbuilding activity helps explain why.
Market commentary penned exclusively for Tanker Shipping & Trade by industry analysts BRL Shipping underscores China's ambition. Chinese interests are now the world's second-largest investor in new tonnage with 133 tankers (17,972,406 DWT) on order. Yards are also successfully competing on the international market and typically are able to offer pricing that is 5-7% cheaper than their Korean counterparts. Medium-sized Chinese yards have been especially successful in attracting stainless steel tankers. As to whether their lack of experience here means that this could see delays and overruns remains to be seen.
Two years ago, the ambitious Chinese started a VLCC new construction programme for domestic ownership, in order to be less dependent on foreign charters for imports. Some 50 VLCCs were firmed, but now it is going far beyond this. The reason is the huge mergers that have taken place in recent months, with COSCO at the helm. Contracting of larger tankers is grabbing the headlines, and in other cases overseas owners are taking advantage of Chinese capital though leasing schemes with purchase options. Rivals South Korea and Japan see this as ‘unfair’ competition, but such inducements always occupy centre stage to attract business.
Chinese ambition is relentless, and is giving the home shipbuilding industry a huge boost. Few shipyards are left as private entities after the spate of mergers under the state umbrella. According to BRL Shipping “the one consoling thought [for its competitors and a market fearful of overbuilding] is that China does appear to mean business in terms of improving the financial state of its industry.”
The only private yards left, BRL Shipping points out, are New Times Shipyard and Jiangsu New Yangzijiang, with the latter having the country’s biggest orderbook. “We can expect a run of orders for Chinese tankers in the coming months.” Orders were recently sealed for COSCO, which will eventually total US$1Bn. Dalian Shipbuilding Industry has been allocated four VLCCs and three Suezmaxes under the auspices of COSCO Shipping Energy Transportation (CSET) to kick off the billion-dollar programme. Orders to follow from CSET will cover three crude Aframaxes and three Aframax LR2 product carriers to be built at Guangzhou, plus two VLCCs that will commit at Nantong Cosco KHI.
So, no let-up in Chinese ordering and building. And no let-up in interest from the global market in this most dynamic of tanker shipping markets.