China’s privately owned petrochemicals producer Zhejiang Rongsheng Holding Group is teaming up with state-owned CSSC Shipping to book up to 30 VLCCs.
The two outfits are forming a joint venture to carry out the order, likely at a yard controlled by CSSC Shipping parent China State Shipbuilding Corp (CSSC).
Industry sources said Rongsheng Holding subsidiary Rongsheng Petrochemical plans to build a large fleet of VLCCs to transport crude oil from the Middle East to its newly built refinery in the Zhejiang province city of Zhoushan.
“Rongsheng Holding and CSSC Shipping will probably not order all the 30 ships in one shot,” a shipbuilding player said.
“There are talks they will kick off the newbuilding orders with two to 10 vessels, and the remaining at later dates.”
Officials at Rongsheng Holding and CSSC Shipping, the leasing arm of CSSC, were not available for comment on this story.
The shipyards that will build the VLCC newbuildings have not been disclosed but CSSC-controlled Shanghai Waigaoqiao Shipbuilding, Dalian Shipbuilding Industry Co and Guangzhou Shipyard International are believed to be vying for the order.
Shipbuilding sources said Rongsheng Holding is looking to conventional fuelling for the VLCCs.
“Chinese shipyards are quoting around $85m for a VLCC newbuilding, but we think the price can be done at around $83m,” a shipbuilding market player said.
According to industry sources, Rongsheng Holding started showing interests in having its own fleet last year.
'Win-win situation'
“The tie-up between the two companies will be a win-win situation,” a tanker expert said. “Chinese shipyards are hungry, and CSSC Shippingis aggressively looking to expand its business since it became a listed company.
“The current shipbuilding price is considerably attractive and the spike in tanker rates that took place a few months ago had probably helped Rongsheng Holding in making a decision to have its owned fleet.”
Listed on the Shenzhen exchange, Rongsheng Petrochemical specialises in the production of petrochemical and chemical fibres. It has one refinery and terminal in operation that has an annual production capacity of 20m tonnes of petrochemicals. Construction was completed last year.
A shipping player familiar with Rongsheng Petrochemical said it is in the midst of building its second refinery and terminal, which will be ready for operation next year. This facility will add another 20m tonnes of petrochemical production capacity.
“There will be a third refinery terminal for Rongsheng Petrochemical,” the shipping source said. “Once it finishes building the third terminal, or the phase 3 project, the company’s annual production of petrochemical can reach 60m tonnes.”
One Shanghai-based tanker expert calculated that Rongsheng Holding will need about 30 VLCCs to ship crude oil from the Middle East to Zhoushan if all three refinery terminals are in production.
Spot specialist
He added that Rongsheng Holding started to fix VLCCs in late 2018, through a trading subsidiary in Singapore called Rongsheng International Trading.
“Rongsheng Petrochemicals’ cargoes are mainly from Saudi Arabia and Rongsheng International Trading has only fixed the tankers on spot,” the tanker expert said.
Rongsheng Holding was established in 1989. It is involved in the petrochemical sector, real estate, logistics and venture investments among other industries.
The company’s website states that its total assets are valued at more than CNY 200bn ($29.5bn) and that it is the second-largest privately owned petroleum and chemical company in China.
