BHP is ratcheting back plans for LNG-fuelled newcastlemax bulker newbuildings — slashing the number of vessels and the proposed charter period by two-thirds.

The mining giant is now seeking offers on just five 208,000-dwt newbuildings, as opposed to the 14 it sought in a tender launched last year, industry players said.

It has also reportedly reduced the charter period on the vessels from 15 years to five.

Those following the business said BHP is still keen to ship its iron ore in vessels burning cleaner fuels, such as LNG, in line with its greenhouse gas reduction plans.

A world first

But they speculated that the cost of the ships and the availability of cheaper low-sulphur fuel oil were probably the primary reasons for the company slashing its plans.

One shipbuilding broker estimated that the vessels would cost between $68m and $69m each in the current market.

“The high shipbuilding price means BHP will have to pay a higher charter rate for the bulk carriers,” an industry commentator said.

Responding to TradeWinds via email, BHP vice president of maritime and supply chain excellence Rashpal Bhatti did not comment on the number of ships sought or their charter periods.

He said: “[BHP] is pleased with the response to the tender for LNG-fuelled transport for up to 10 per cent of the iron ore.

“This will be a world first for bulk carrier fuel and we hope that introducing LNG-fuelled ships into BHP’s maritime supply chain will eliminate NOx [nitrogen oxide] and SOx [sulphur oxide] emissions and significantly reduce CO2 emissions along the busiest bulk transport route.

Stewardship role

“We recognise we have a stewardship role, working with our customers, suppliers and others to influence emissions reductions across the full life cycle of our ­products.”

In December, Bhatti told The Age and Sydney Morning Herald that the company could be awarding the tender contract in March or April, but this did not happen.

“The Covid-19 pandemic and the global economy recession might have caused the delay,” one shipping player said.

BHP went out to tender last July, inviting companies it works with to offer proposals on 10 firm and four optional 210,000-dwt dual-fuel bulkers. It offered 15-year charters on the ships, which would be employed transporting iron ore from Australia to China.

Companies that had been approached were said to include China Cosco Shipping, Japan’s ­MOL and NYK Line, Taiwan’s U-Ming Marine Transport, Singapore’s Eastern Pacific Shipping and Norwegian rivals Golden Ocean Group and 2020 Bulkers.

“BHP has been talking about this project for a long time,” one shipbuilding observer said.

“A tender like this would normally take a few months to wrap up, but this is taking close to a year. Some of the shipowners have gotten tired of waiting and have dropped out.

Expired enquiries

“Shipping companies that are still keen on BHP’s tender will need to go back to shipyards for new enquiries, as the number of ships is only five. The previous enquiries have expired.”

BHP has been pursuing the concept of LNG-fuelled bulkers since early 2018.

It was one of the companies that Australian energy outfit Woodside was working with on the Green ­Corridor joint industry project. The others were Fortescue Metals Group and Rio Tinto with shipowners MOL and U-Ming.

All are working alongside Shanghai Merchant Ship Design & Research Institute and classification society DNV GL.