Belgium’s Compagnie Maritime Belge (CMB)’s order for a dozen 6,000-teu container ship newbuildings at China’s Qingdao Yangfan Shipbuilding is facing delays and cancellation.
Multiple sources in the shipbuilding industry said that six midsize boxships that CMB ordered last year have been cancelled.
In addition, they said delivery of the first of six newbuildings that it inked in 2020 was also running behind schedule.
Market chatter is that Qingdao Yangfan and CMB have agreed to terminate the newbuilding contract for the second batch of six vessels ordered in March 2022 as the shipyard has failed to arrange refund guarantees for the project.
A low shipbuilding price was cited as the reason that prompted Chinese banks to refuse refund guarantees.
Shipbuilding sources in China said domestic banks view the industry to be a high-risk business and would only arrange refund guarantees for newbuildings that they deemed would make a profit.
The price of CMB’s second batch of container ships was not disclosed, but sources said the initial six units were “underpriced”.
CMB was reported to be paying just less than $50m each for the 40-metre beam ice-class IA notation boxships that are fitted with 1,150 reefer plugs.
The contract for the first batch was signed before the huge hike in steel plate price and material costs.
An official at Qingdao Yangfan declined to confirm if six of CMB’s container ship newbuildings had been cancelled while CMB was not available to comment when contacted by TradeWinds.
Tentative revamp deal
However, European sources familiar with the business said nothing had been cancelled and that the deal was being “revamped”.
They added talks involving the shipowner, Qingdao Yangfan and charterer CMA CGM are ongoing.
Nothing so far has been cancelled, at least not because of problems obtaining refund guarantees, said one European source.
“It’s the usual excuse you hear when certain slots do not materialise,” he said.
The source suggested that CMB already had obtained refund guarantees on the second batch of six ships, but acknowledged there were elements of the deal that the three parties wanted to change.
That might be because the shipyard had committed to a series of ships at a cheap price, the source said.
However, the yard had not yet ordered the steel for the final sextet, so has not yet suffered any cost increase, he added.
“With prices softening a bit, they might want to continue the ships. It’s a balancing act for the yard,” the European source said.
Other considerations might be that CMB would need the ships to be delivered on time, while CMA CGM might not want all 12 ships.
CMB was reported to have sold the first batch of six boxships to CMA CGM early last year, when the market value of each newbuilding was $78m — allowing the shipowner to pocket more than $168m in profit.
TradeWinds understands that CMA CGM has a purchase option on the second batch of vessels, which it has yet to decide whether to exercise or not.
London broker Clarksons’ Shipping Intelligence Network lists Qingdao Yangfan as slated to deliver four of the first sextet this year and the remaining two in February and May 2024.
Delivery of the first vessel in the series, the CMA CGM Masai Mara, is scheduled for this month, but TradeWinds learned that the trial test for the container ship has yet to be carried out. It is obvious that the delivery of the vessel will be delayed and this is said to be due to delays in construction and equipment.
Some shipbuilding sources said Qingdao Yangfan wants more money for the second batch of six vessels and the shipyard’s demand would be included in the tripartite discussion.
Qingdao Yangfan was established in 2008 by Beijing-based industrials company Jianlong Group and state-owned Qingdao Huatong Group. The part state-owned shipyard stopped building vessels in 2016 after facing cash flow problems.
In 2018, the shipyard was bailed out by minority shareholder Qingdao Huatong Group after major shareholder Jianlong Group quit the yard.
After the bailout, Qingdao Yangfan completed two half-built newcastlemax bulkers that were originally ordered by Trafigura. The shipyard sold the duo — the 206,000-dwt Mineral Yangfan (built 2019) and Mineral Qingdao (built 2020) — to CMB subsidiary Bocimar for more than $50m each.
Qingdao Yangfan officially made a comeback to shipbuilding in late 2020, when CMB ordered the 6,000-teu newbuildings there.
