Chinese firms wanting to buy ships for import are feeling their way back to the secondhand market with the purchase of two supramaxes after Beijing imposed a string of domestic emissions restrictions this summer.
The new regulations banned the import of non Tier-II tonnage, leading some Chinese sale-and-purchase brokers to predict that small, cash-oriented private owners would find themselves unable to renew their fleets.
Beijing did not introduce new age limits on import tonnage, but the regulations mean would-be buyers now have to secure funds to acquire vessels young enough to have been built to the IMO's Tier-II specifications or take a risk that regulators will approve older tonnage retrofitted to meet those standards.
Last week, Chinese buyers braved a 28% import tax to purchase two imported supramaxes, according to brokers.
Supramax changes hands
As TradeWinds has reported, Greece’s Oceanbulk Maritime sold the Qingshan-built, 56,400-dwt Tron Legacy (built 2011) for some $12.9m.
The figure is understood to be the seller’s proceeds. The total for the Chinese-flag buyer including import duties is believed to be around $16.5m.
- Greece's Oceanbulk Maritime sold the Qingshan-built, 56,400-dwt Tron Legacy (built 2011) for some $12.9m
- A 2010-built vessel of the same Sdari 57 design changed hands for around $12m net of import tax
Shanghai brokers have since said a state-owned company is behind the purchase of the Tron Legacy, with some identifying China Merchants Group subsidiary Yangtze Navigation as an active buyer for domestic trading.
Another anonymous player is said to have made a similar leap for a 17-year-old Japanese vessel. A buyer is reported to have picked up a 2010-built ship of the same Sdari 57 design for around $12m net of import tax.
Some believe the ship is the 57,000-dwt SSI Invincible (built 2010), previously owned by Densay Gemi Shipping.
The Zhejiang Zhenghe Shipbuilding-constructed product tanker was the only ship of that age built to the IMO's Tier-II emission standards known to be on the market last week.
So could these deals indicate a market revival? Not so, say Chinese brokers, who add the formerly brisk trade in 17-year-old dry bulk tonnage of up to panamax size appears to have been killed off.
Buyer profile
Brokers point out the buyers in the recent trades are relatively well funded state-owned companies, as opposed to private businesses that traditionally dominated the import market.
Neither buyer sought out panamaxes, the traditional workhorses of the north-south coastwise coal trade.
And so far, nobody has dared to test the regulatory waters with such a retrofit, and most believe that authorities are observing an unwritten age limit.
Meanwhile, some domestic owners are being tempted to take profits on ships already imported into the Chinese flag.
One such deal involves Yangtze Navigation as the buyer of Shanghai Haiyu Shipping’s 48,200-dwt Xing Qiang (ex-Sparrow, built 2000).
Eagle Bulk Shipping sold the Oshima Shipbuilding-constructed bulker in May 2017 for a reported $5.7m. Brokers said the ship recently fetched about CNY 80m ($11.5m) on the Chinese domestic market.
Price premium
On that basis, approximate price estimations for Chinese-to-Chinese secondhand deals are generating offers at around CNY 90m for a supramax and CNY 100m for a panamax. Domestic deals would also be subject to VAT at around 16%.
But some shipowners are said to have turned down such offers, even though they represent a significant premium on the price of a ship imported at last year’s levels.
The rationale is that current Chinese financial market does not offer attractive ways to place the proceeds of a sale, and a panamax in the domestic coal trades can generate around CNY 20m per year, even given a current dip in the domestic coal index.
