Shandong Shipping is in talks with Chinese yards to order a series of capesize bulkers for charters to German power giant RWE in a deal that would greatly expand its owned fleet in the segment.
Sources close to the shipowner said the charter package is agreed in principle and talks are ongoing with yards and financiers to build 10 ships of 180,000 dwt each on the basis of 10-year time charters to RWE at index-related rates.
Some commercial sources said the deal also includes options for up to four additional ships. The capesizes would be built to modern specifications and include scrubbers.
Shandong Shipping (HK) Holdings' Qingdao-based general manager Li Maozhong, who has responsibility for the dry bulk business, declined to comment because no charter has been signed yet.
German charterer RWE is said to have been driving a hard bargain on charter terms.
Low floor rate
The deals are understood to involve a relatively low floor rate, with a 50:50 split of profits above the floor for the first five years, but with all the upside going to RWE for the last half of the charter. Paris-based BRS is said to be the deal’s chartering broker.
Nevertheless, sources briefed on the talks said Shandong Shipping has told financiers it is confident the deal is a moneymaker.
No price has been reported for the planned newbuilding orders but, with market sources estimating a cost of $53m to $54m per ship, it would certainly top $500m. Some sources said Shanghai Waigaoqiao Shipbuilding (SWS) and Qingdao Beihai Shipbuilding Industry are the yards slated to construct the vessels, but sources close to Shandong Shipping said no shipbuilder has been confirmed for the deal.
Brokers added that several yards from both SWS' parent, the southern China State Shipbuilding Corp (CSSC) state-owned yard group, and its northern rival of China Shipbuilding Industry Corp (CSIC), to which Qingdao Beihai belongs, have been courting the contract.
With charterparties of 10 years, there would not be
too much discussion. The deal could be done very quickly
But amid filling orderbooks, one newbuilding broker said yards are "no longer easy" on price.
Pure finance lease
Bank of Communications Financial Leasing (BoCom FL) has been frequently mentioned in connection with the ships, but its officials told TradeWinds that there is no such firm deal. Any such leasing arrangement would be a pure finance lease.
However, financiers agree that the major Chinese leasing houses would jump at such a deal if the RWE charters firm up. They pointed out that big finance lease-package deals have been scarce recently and the capesize segment has a promising long-term outlook despite newbuilding prices that are holding owners back from an ordering frenzy.
"With charterparties of 10 years, there would not be too much discussion. The deal could be done very quickly," said one financier who is sceptical that Shandong Shipping has a package of charters of the size being mentioned.
Burned in the past
Provincially owned Shandong Shipping has been burned in the past by too thin margins on its long-term charters of Valemax ore carriers to Brazil's Vale.
Over-the-counter-listed Shandong Shipping is a large but compartmentalised shipowner, with several fleets operated much like separate but jointly funded companies.
One division, Shanghai-based Pacific Gas, is owned together with shareholder Kylin Capital and controls eight VLGCs and a smaller gas carrier. Another wholly owned project, Shandong Offshore Engineering, is building a set of advanced semi-submersible heavylift vessels to be purpose built for rig decommissioning.
Shipping databases list Shandong Shipping's main merchant shipping division with a fleet of 14 bulkers, including three capesizes, and more recently it has branched out into MR product carriers.
However, Shandong Shipping also controls a large fleet of kamsarmaxes through Singapore-based joint venture SDTR Marine.
