COSCO Goes Big with $7B Order for 87 Ships in Vessel Renewal Project
In an industry familiar with large orders, China’s COSCO Shipping has nonetheless drawn attention with reports that it signed an order that will see the company build 87 new vessels across all segments of its fleet. China State Shipbuilding reports the order is valued at approximately $7 billion, although it cautions in a stock exchange filing that the final terms will evolve as the projects proceed.
Chinese media is reporting that it is the largest ever order placed between a shipping company and a shipbuilder in China. The deal was announced with an equally appropriate level of fanfare.
COSCO is calling the contract a significant measure to adapt to market trends. It highlights the order as a step to maintain the company’s scale advantages while optimizing the fleet. It said the ships would reflect the emerging market trends of large-scale, green, and intelligence development.
No specifics were offered on the timetable, but the companies emphasized that the framework will touch all segments of the company’s business. They said it would include container shipping, dry bulk shipping, oil and gas transportation, special vessel transportation, and passenger ship transportation. Among the vessel types referenced are ultra-large container ships, ultra-large bulk carriers, ultra-large oil tankers, grain transport ships, multi-purpose heavy lift vessels, MR tankers, ro-ro ships, and small box ships.
The agreement comes just months after China State Shipbuilding Corporation completed its latest restructuring designed to increase efficiency and competitiveness. In the announcement, they said most of their divisions would be involved, including Jiangnan Shipyard, Dalian Heavy Industry, Wuchang Shipbuilding Industry, Guangzhou Shipbuilding International, China Shipbuilding Chengxi, and Beihai Shipbuilding.
The company seems to show little regard for the U.S.’s plan to impose fees on Chinese-built and owned ships. It had been pointed out that the company could have been paying billions of dollars in fees if the U.S. had not agreed to delay the fees for one year as part of the trade negotiations.
While the new framework might incorporate some of the previously announced orders, it also appears to expand on an already large orderbook placed by COSCO. Alphaliner reports the group already has 82 containerships with a total capacity of 1.1 million TEU on order. So far this year, according to media reports, COSCO has already ordered 25 Capesize bulk carriers. Two months ago, the company added a further 23 bulk carriers and six ultra-large tankers to its orders.
Analysts note that an order of this magnitude is likely to ripple through the industry for many months to come.