New regulations effectively slashing the age of ships that Chinese owners are allowed to buy for domestic trades will put a stop to a highly lucrative trade for Greek sellers.
The new rules, which will take effect in a little under two months’ time, do not set an age limit as such but require imported ships to be Tier II compliant, which means they must have been built in 2011 or later, or retrofitted.
The new requirement will be in place for five years, which means the new effective age limit of seven years will gradually rise.
Until now, China has allowed the bulkers of up to 18 years old to be imported, a ceiling which had been widely expected to be trimmed to 15.
Current age limits for imported secondhand passengerships and tankers are stricter at 10 and 12 years, respectively, while 20-year-old boxships have been permitted.
Greek owners have been the biggest beneficiaries under the current regime.
According to TradeWinds’ analysis, 41 of the 76 bulkers aged over seven years old that are known to have been sold by Greek owners in the past 12 months went to Chinese buyers, in deals worth about $325m.
Greeks had been the old regime’s biggest beneficiaries. According to TradeWinds' calculations, 41 out of the 76 bulk carriers older than seven years that Greek owners are known to have sold over the past 12 months have gone to Chinese buyers, in deals worth about $325m. Including the deals that have been reported but not confirmed or completed yet, the tally could rise to as much as 54 ships in deals worth around $440m.
Such owners have included major players such as George Economou, who took advantage of Chinese interest to renew his fleets by selling older vessels at relatively high prices, especially when compared with the rock-bottom levels of two years ago.
In the wake of the new rules, market observers expect the values of older ships, which are immediately affected by the measures, to fall, while the number of deals will plummet. Others, however, expect benefits for younger vessels.
Diving values
“The value of these older dry bulk vessels will dive now that interest by Chinese owners engaged in coastal trades will fizzle out,” said one Athens-based shipping executive who has no such ships in his fleet.
“All in all, it’s a positive measure for dry bulk,” he told TradeWinds. “There are increased chances of these vessels being scrapped, rather than [owners] absorbing the high capital spending needed to comply with regulations on 2020 emissions and ballast water treatment.”
One Greek owner, who has been trying to sell a vessel in China, shrugged off the new age limit.
“If we don’t manage to sell the ship, we will just pay for its special survey and continue trading it,” he said. “Traditional companies, which haven’t expanded recklessly and are in no pressing need to sell, won’t have any problems.”
There are increased chances of these vessels being scrapped, rather than absorb the high capital spending towards compliance with 2020 emissions and ballast water treatment regulations.
Greek shipping executive
However, another Athens-based broker said that this sounded like the owner was putting on a brave face. “The money to be made by trading, even in this good market, will never equate the proceeds from a sale,” he said.
Several brokers involved in such deals said that the sudden announcement that the new age limit would be imposed in less than two months’ time appears to have already frustrated some sales.
TradeWinds understands that this includes the sale of the 52,400-dwt Kavo Aetos (built 2003), which several brokers said this week was sold by Gourdomichalis Maritime to Chinese buyers for $9.45m.
The Greek company has denied the vessel has been sold, but did not elaborate further.
TradeWinds’ sources say the deal is dead because of uncertainty about getting an import license.
Another such sale that was recently reported but does not appear to have materialised is that of DryShips’ 72,600-dwt panamax Marbella (built 2000) for $9.2m.
The fate of the 50,500-dwt Kaity L (built 2003), which Greece’s Vrontados is said to have sold to Chinese interests for $8.5m, is also unclear. The owner did not respond to requests for comment by TradeWinds’ press time.
Ship sales to Chinese owners are known to be fraught with time-consuming formalities. But for deals that can be completed prior to the new age limit being imposed, the new rules could swell ship values.
One broker said that immediately after the new rules were announced, offer prices rose by 4% or 5% for ships that are likely to exchange hands prior to the changes.
That could affect the prices of vessels that have been circulated for sale over the past few days, such as the 74,100-dwt panamax Rodon Amarandon (built 2001).
Goulandris Bros has reportedly put the ship up for sale, but the company declined to comment.
Meanwhile, there are still Chinese owners out there buying older Greek tonnage for international trades.
Probulk Carriers sold the 72,400-dwt Nearchos (built 1998) last month for more than $5m. The vessel has already been renamed the Wan Li and is flying the flag of Panama.
Middle Eastern companies have also been frequent buyers of older Greek tonnage. Their interest has so far focused on units built before 2000. However, the expected price drop for younger ships may increase their appetite.
The lowering of the Chinese age limit stands to have an even more wide-ranging effect on the sale-and-purchase market.
“This will make life more difficult for Greeks buying vessels built after 2011,” said one Greek broker who declined to be named. “There will be more competition for these ships now and their value will rise.”
Another Athens-based shipping source points out that the price gap between Chinese-built tonnage and ships made in Japan or South Korea is likely to narrow, as demand for Chinese-built ships intensifies.
