A few small ships played an outsized role in international relations this week as China won over one of Taiwan’s few remaining diplomatic partners.
On Monday, Solomon Islands Prime Minister Manasseh Sogavare moved to shift diplomatic relations from Taiwan to mainland China.
The sparsely populated, far-flung South Pacific archipelago with 600,000 inhabitants and 900 islands is the latest country to turn its back on Taipei. Most notably for shipping, long-time ally Panama made its move in 2017.
Under the all-or-nothing rules of Beijing’s One China policy, maintaining formal diplomatic relations with both China and Taiwan is not an option. Only 15 United Nations member states now recognise Taiwan (formally the Republic of China).
American officials had publicly discouraged the Solomon Islands’ move, but the US itself shifted its ties from Taiwan to China in 1979, although it maintains close informal ties with Taipei.
The diplomatic defection would have been unlikely but for the swarm of veteran logs-fitted handysize bulkers that carry the Solomon Islands’ main export.
Chinese log traders and end users depend exclusively on what is in effect a closed group of small private users in a shuttle trade between makeshift coastal loading areas in the islands and the specialised discharge terminals centred on the Yangtze River port of Zhangjiagang.
Forestry exports are so important to the Solomon Islands economy that political parties and candidates are classified as pro-logging or anti-logging, because the industry is considered the source of many of the tensions and most of the cash in local politics. Sogavare, elected in April, is reckoned as very pro-logging.
The industry is controversial because of its social and environmental effects. Better enforcement of environmental regulations in West Africa and South East Asia has made the Solomon Islands, along with neighbouring Papua New Guinea, the main source of China’s round hardwood logs, giving Beijing special advantages here in its worldwide campaign to round up what remains of Taiwan’s diplomatic support.
At the trading and shipping level, logging is controlled by Chinese traders based in the Solomon Islands. Transactions take place at the Pacific Casino Hotel in the capital, Honiara, which has been the scene of repeated riots and demonstrations by local opponents of the Chinese loggers and log traders.
An official of one Chinese shipowner that is a major player in the Solomon Islands, Zhangjiagang Oceanicwit Shipping, sees no direct effect on business coming from the new diplomatic relations.
“There will not be much influence on our business because our charterers are all Chinese log buyers,” said the official, who added that the market was more open because of the change in government this year.
Difficult and risky
“The more important thing is that our customers’ products are not selling as well now because of the slower Chinese economy.”
Oceanicwit Shipping controls 22 vessels, according to the official, of which 19 are loggers. It operates worldwide but most of its business is in the Solomon Islands-Papua New Guinea trade.
For non-specialist logger owners, the Solomon Islands is not a trade to be entered lightly, and larger handysize operators, whether Chinese or not, say they avoid it because it is physically difficult and commercially risky.
In one typical voyage, Hengfa Shipping’s 28,500-dwt Ocean Great (built 1993) arrived in the Solomon Islands in early May and spent more than a month calling at seven locations around the New Georgia Islands and Guadalcanal, none of them conventional ports, before returning home to discharge in Yangzhou.
The difficulties along the way, starting with the inadequacy of charts, keep many players out of the business.
“One of our small handysize vessels once carried some Solomon Islands logs to find out what the trade was like, and we decided it is not for us,” one Chinese executive of a company that owns modern handysize vessels told TradeWinds.
“First, nobody has control of the loading procedure. The logs are floating offshore and the ship has to load them with its cranes and travel from place to place, which you sometimes have to do in West Africa. So loading rates are extremely slow. There is no cargo readiness, so one month of loading in the islands is normal and two months is not very unusual.
“Overseas Chinese log traders mostly control the trade, and they are like domestic Chinese charterers — according to our experience, they will object to our demurrage calculation. In a business like this, you must rely on demurrage to make your business profitable.”
Loggers bound for New Zealand and Australia often pass through the Solomon Islands on their journey, but despite the similar route, these trades seldom mix.
That goes for handysize players including Pacific Basin Shipping, China Navigation, Asia Maritime Pacific, state-owned Yangtze Navigation and China Cosco Specialised Shipping with its 11 loggers.
Most of the Chinese vessels specialising in the trade are early 1990s-built tonnage acquired for near-scrap prices over the past four or five years. Many of the owners are single-ship players, or owners with one logger devoted exclusively to the Papua New Guinea-Solomon Islands trade in addition to other types of vessels.
Specialists with substantial fleets include Oceanicwit Shipping and Singapore owner Feng Sea Shipping.
Switch to West Africa
Chinese-controlled Feng Sea has 10 loggers of around 28,000 dwt built between 1991 and 1997, plus one Palau-flag veteran built in 1985. Like some of the other players, Feng Sea occasionally makes a triangulating discharge in Indonesia or the Philippines, and sometimes delivers a log cargo to Kaohsiung in Taiwan, but otherwise its ships trade in shuttle fashion between the South Pacific loading areas and Zhangjiagang and other upriver log terminals of the Yangtze River.
Companies such as Wuhan Yidong Shipping Management, Guangzhou Seaway International and Harvey Ship Management have two to four 1990s-built handysizes each, usually acquired since 2015, trading mostly or exclusively in the Solomon Islands-Papua New Guinea trade.
A more conventional owner, Shanghai Vasteast International Shipping Management, mixes that logging niche trade with classical varied handysize trading. Of its fleet of 12, Vasteast has two ships involved in the trade. It recently switched three vessels from South Pacific trading to similar West African work.
