Three South Korean shipowners are poised to book newcastlemax bulkers worth about $594m at China's New Times Shipbuilding as part of Vale's latest newbuilding drive.
The Jiangsu-based yard will build up to 11 new ships, including options, ordered by Polaris Shipping, H-Line Shipping and Pan Ocean.
The 210,000-dwt vessels are backed by five-year contracts of affreightment from the Brazilian mining giant. The scrubber-fitted newcastlemaxes, which will be built to IMO Tier III standards, are said to be costing about $54m each.
New Times is slated to deliver the ships from the second half of 2020 and in 2021.
This is the first tender for newcastlemaxes on long-term charter for Vale. Previously, it has only tendered orders for 400,000-dwt Valemax VLOCs and 325,000-dwt Guaibamaxes.
Changing practice
One industry source familiar with Vale said the company usually charters capesize and newcastlemax bulkers from the spot market. The Rio de Janeiro iron-ore miner is changing its practice as it anticipates charter rates will strengthen over the next five years, and it is looking to lock in the vessels before the spike.
Sources added that newcastlemaxes are flexible to trade and they can call at key ports in China and elsewhere.
Shipbuilding sources said the South Korean shipowners have chosen New Times owing to its competitive pricing.
There is a possibility that Polaris and H-Line may increase their orders by two vessels as they are planning to take over the two ships that Korea Line was bidding for
Officials at New Times declined to comment on the yard's shipbuilding activities, citing contract confidentiality.
One shipping source familiar with the deal said Polaris is looking to order two firm ships and two options, while H-Line plans to book three vessels. Pan Ocean is going for two newbuildings.
“There is a possibility that Polaris and H-Line may increase their orders by two vessels as they are planning to take over the two ships that Korea Line was bidding for,” said the shipping source.
Korea Line 'investigation'
The source said Korea Line dropped out of Vale’s newbuilding project because it is under some “investigation” by its parent SM Group.
One Korea Line executive confirmed the company is not continuing with Vale’s bid, explaining that earnings from the contract do not meet its targets.
He also said the ongoing “investigation” at Korea Line by SM Group is nothing major.
“SM Group has carried out similar audits on construction companies under its holdings and it finds this to be a good practice,” said the Korea Line executive. “It is extending the auditing to all its subsidiary companies.”
