ICBC Financial Leasing (ICBC Leasing) and China Merchants Energy Shipping (CMES) are teaming up again with Shanghai Waigaoqiao Shipbuilding (SWS) to offer on BHP's tender for dual-fuel newcastlemax bulkers.
TradeWinds broke the news in July of the project, which carries a price of around $840m for the total reported 10 firm and four optional ships, backed by 15-year charters.
Financial sources believe a 70% to 30% joint venture between ICBC Leasing and CMES would be likely to order half the firm ships under the proposal, while CMES places the order for the remaining vessels alone but with a view to 90% lease financing by ICBC Leasing at a later stage.
SWS, with its current focus on cruiseship newbuildings, will be close to full capacity and may not be able to handle the entire order by itself if its team wins.
But the expectation among Chinese newbuilding brokers is that the ICBC Leasing-CMES-SWS team will have a chance, and that BHP’s order could grow considerably beyond what is already reported.
China Cosco Shipping, Japan’s MOL and NYK Line, Norway’s Golden Ocean Group and 2020 Bulkers, Taiwan’s U-Ming Marine Transport, and Singapore’s Eastern Pacific Shipping have been reported on the first-round list of operators.
Structure change
TradeWinds understands another Chinese participant — Shandong Shipping — may be involved, as well as Greece’s Maran Dry Management and Thenamaris.
It is said the second-round players have not yet been shortlisted.
The latest deal would duplicate a structure that the two owning partners have used in the past backed by time charters and contracts of affreightment (COA).
In 2016, ICBC Leasing set up VLOC Maritime Holdings and partnered with CMES — through 70% to 30% joint venture China VLOC — to take over secondhand Valemaxes and order further ships on their own.
Last year, CMES followed up the cooperation when it bought a minority share in a six-ship series of 325,000-dwt ore carriers that an ICBC Leasing entity had on order at Qingdao Beihai Shipbuilding Heavy Industry, also for long-term business with the Brazilian miner.
China VLOC's last two Valemaxes on order were delivered earlier this year from Qingdao Beihai and Yangzijiang Shipbuilding, putting its fleet at 17 Valemaxes.
An official for CMES sister company Ming Wah declined to comment on the plans. ICBC Leasing could not be contacted for comment. SWS officials were contacted but could not provide comment on the proposal immediately.
BHP has previously confirmed to TradeWinds that the tender process is underway but has said that the proposal involves purely LNG-fuelled vessels rather than dual-fuel propulsion, and that the charter period and exact number of ships is not specified.
$60m per ship
Newbuilding brokers have pegged the cost at $60m per ship for dual-fuel newcastlemaxes with 6,000-cbm LNG fuel capacity, which allows for an Australia to China round trip before refuelling. A conventional ship with scrubbers might cost $55m.
BHP has been bullish on the prospects for LNG-powered vessels and LNG bunkering.
Rashpal Bhatti, BHP’s vice president of market freight, said in June that vessel owners would need to be “brave” to order ships with only conventional propulsion, which might be phased out during the lifetime of the ships, making current models of vessel valuation obsolete.
“[That] 20-year vessel depreciation model is no longer relevant today,” Bhatti said at the time.
But some still believe LNG propulsion remains premature for the trading capesize owner and only makes sense for a long-term project like BHP's tender.
“For the moment, it is only useful if you do shuttle voyages and those voyages are between fixed ports and those ports can supply LNG,” said James Tarng, vice president of Taipei-based capesize owner Chinese Maritime Transport.
