Private shipowners in China have seen a growth opportunity stalled as secondhand vessel prices have started to catch up with booming freight rates.
Sale-and-purchase shipbrokers' anecdotal accounts, as well as statistics, show secondhand sales after March at a near standstill as China's private owners retreat.
Shanghai brokers believe there are still private buyers willing to pay the price for the few veteran ships coming onto the market, but optimistic owners who sealed deals before Chinese New Year in February can now be considered the winners.
But the biggest story among Chinese secondhand buyers was a government owner that has developed from ship financier to operator.
The year has seen a continued build-up in the ultramax fleet of China Development Bank's CDB Financial Leasing, which despite its name is not just a financier.
Successive fleet purchases in the past 12 months include both sale-and-leaseback financings and operating acquisitions, some in cooperation with provincial government-owned Beibu Gulf Shipping.
Between November 2020 and May this year, CDB Financial Leasing amassed 20 ultramaxes and two supramaxes in financing transactions with Oldendorff Carriers and Clipper Group, and more significantly in non-financing acquisitions from Celsius Shipping and Eneti, the former Scorpio Bulkers.
Determined buyers
Speaking to TradeWinds, Shanghai-based S&P brokers offered broadly similar takes on the situation facing their clients.
Many small secondhand owners in independent shipowning havens, such as Fuzhou and Ningbo, traditionally managed to renew their small fleets and remain aggressive buyers but the financial and market environment has changed.
One leading broker who was not willing to be identified said the winners this year have been the optimists who were willing to meet sellers halfway on price expectations.
"Before Spring Festival, most Chinese owners were saying they would see what happened after the holiday, but several wanted to buy. They confirmed the deals before Spring Festival but took delivery afterwards and these owners made a lot of money," said the broker.
A recurring name among buyers of veteran tonnage listed by brokers and reference sources remains "Unknown Chinese", and not many of the deals by small companies that brokers mention can be confirmed.
Information provider VesselsValue reckons Chinese owners bought 230 vessels over the past 12 months and attributes 70 of these to "Unknown Chinese". The actual proportion is likely even larger, because the 230-vessel figure includes many internal sales among different branches of Cosco and sale-and-leaseback financings.
But buyers who can be identified have done well for themselves and many independents remain convinced they can do lucrative deals with veteran tonnage based on their market outlook.
Small Fuzhou owner Hong Sheng Da, for example, picked up a veteran panamax — the 73,900-dwt Very Maria (built 2001) — before Chinese New Year for $5.5m. The ship has probably come close to earning its purchase price since then, besides doubling in resale value. VesselsValue prices the Very Maria at $11.26m, over a scrap value of $6.06m.
The head of one well-known international brokerage's Shanghai office said that estimate was low.
"There are not many older secondhand bulkers for sale but I am doing deals," added the broker, who spoke on condition that their company not be identified. "You can get ships for January delivery and there are some deals like that under negotiation. There are buyers who will wait."
China-to-China sales
One extraordinary Covid-19-related factor that has constrained Chinese S&P activity throughout the period is the frequency of China-to-China sales. In many cases, the practicalities of sales negotiations and crew changes have given mainland sellers only the option of selling to mainland buyers.
One of China's biggest sellers has been state-owned SDIC Far East, the shipowning company owned by centrally controlled State Development & Investment Corp, commonly known by its Chinese abbreviation Guo Tou.
In February and April, SDIC Far East sold 10 ships built between 2010 and 2015, two post-panamax bulkers and eight supramaxes, to five different mainland-based owners. Two more supramaxes in the same fleet financially owned by ICBC Leasing went at the same time.
The sales bolstered the fleet of Haikou-based Hainan Haisheng Shipping, a branch of state-owned Cosco Shipping that was reported bankrupt in 2016. However, that now appears incorrect as this year’s sales reportedly boosted Hainan Haisheng’s fleet from 10 to 18 ships.
The rest of the ships have gone to smaller mainland Chinese owners.
