US dry bulk charterer Bunge is said to have achieved strongly favourable terms on a kamsarmax quartet ordered by China’s ICBC Financial Leasing.
Rival Chinese financial leasing houses told TradeWinds they are concerned that the terms could set a trend that gives lessors less exposure to a market recovery
Beijing-based ICBC is said to have given up any profit share above the deal’s ceiling. In the event of a market recovery, Bunge will be able to pocket the upside, while ICBC retains the risk of a prolonged depression in Baltic Exchange rates.
Chinese financial sources said the long-term chartered kamsarmaxes are index-linked, with a floor of around $8,500 per day and a ceiling of $13,000 per day.
Conservative strategy
An ICBC official declined to comment on specifics of the charter terms but said numbers being cited in the market are incorrect. He also said the charters do allow the lessor some upside participation, but admitted his company’s thinking in the present market is primarily conservative.
“We are currently more looking at protecting ourselves on the downside than looking at the possible upside,” he said.
TradeWinds reported in February that Shandong Shipping Corp and ICBC were collaborating on a planned order for four kamsarmaxes with a seven-year charter to grain-trading giant Bunge.
We are currently more looking at protecting ourselves on the downside than looking at the possible upside
ICBC official
ICBC’s order for four 81,200-dwt ships at Cosco Shipping Heavy Industry (Yangzhou) was reported last week. The price per ship is said to have come in at $27m. They are for delivery starting next year.
The ICBC official confirmed the general terms of the reported order and said similar deals with other charterers are being negotiated, but no speculative deals for ICBC’s own portfolio.
Officials at Bunge were not immediately available for comment.
“I am a little bit afraid of the effect this deal will have on the other leasing companies, because a deal of this kind by ICBC could be a kind of benchmark,” one Shanghai leasing company official said.
Other industry sources are less concerned. “It is normal in a poor market to concentrate on protecting your investment,” one said.
Chinese leasing companies have become increasingly bold about ordering bulkers up to kamsarmax for their own account and arranging sales or charters as they are delivered, in some cases operating the ships themselves upon delivery until a suitable charter is found.
ICBC rivals, including Bank of Communications Financial Leasing (Bocomm Leasing) and China Development Bank Financial Leasing (CDB FL), have unchartered ultramax and kamsarmax bulkers on order or on the water whose rates could be affected.
CDB FL signed a letter of intent in November to build up to 12 ultramaxes and kamsarmaxes at Sumec Marine’s New Dayang Shipbuilding. In January, it ordered six kamsarmaxes there, and last month it firmed up four of the ultramaxes.
Bocomm Leasing is understood to have 10 kamsarmaxes from a Chengxi Shipyard series awaiting charter, four of them on the water and six yet to be delivered.
