Shun Yuen Enterprises Group has taken redelivery of two asphalt carriers from a Cosco subsidiary in the wake of US sanctions against arms of the state-controlled shipping giant.
The mutually agreed charter termination is meant to spare Hong Kong-listed Shun Yuen any knock-on effects from US sanctions on China Cosco Shipping subsidiaries.
Cosco’s $3.91m payout for the early termination breaks down as $1.33m for the 12,800-dwt San Du Ao (built 2011) and $2.58m for the 12,000-dwt Zhuang Yuan Ao (built 2012). Before the charter cancellations, Cosco had had the ships on 10-year contracts since they were delivered.
The San Du Ao was built at People’s Liberation Army No 4807 Shipyard at a cost of $24.3m, and the Zhuang Yuan Ao at Cosco Dalian for $26m. Both ships are financed by Minsheng Financial Leasing.
Asphalt carrier fleet
Shun Yuen now has a fleet of 10 asphalt carriers, six on long-term charters and four trading under contracts of affreightment, with some spot business.
The former small tanker specialist is also planning more secondhand capesize buys, according to a source with knowledge of the company’s plans.
It controls two recently purchased capesize bulkers and has started a strategic shift away from asphalt tankers, following a share buyout and the departure of its former chairman.
Until late last year, Fuzhou-based Shun Yuen was a pure niche player and sold itself as such in a September 2018 Hong Kong initial public offering. Following the departure of its founding chairman, however, it has put a hold on expansion in the struggling asphalt tanker market.
The source said it hopes to build up a substantial capesize fleet, starting with two or three more purchases in 2020.
TradeWinds understands that new shareholders who took majority control in October are closely associated with steel magnate Chen Maochun, whose trading company Xing Hua Iron & Steel is based in nearby Wu’an.
Chen’s name does not appear in company announcements of shareholdings, and the source close to the company played down talk of his involvement.
Major customer
A company official declined to speak on the record, but Hong Kong Stock Exchange filings detail the shareholding and fleet changes.
When Shun Yuen listed, three founders controlled 91% of shares and a major customer the remaining 9%. Since last summer, however, the founding trio has sold down. Chairman Ding Xiaoli resigned in August and was replaced by newcomer Wang Faqing.
In July, the board resolved to put the $15.7m IPO proceeds towards secondhand capesizes instead of ordering more asphalt carriers, and approved the purchase of the 177,000-dwt XYG Fortune (ex-Shinyo Diligence, built 2006) for $16.5m. The sale closed in late November. By then, Shun Yuen had also paid $15.6m for the 203,300-dwt XYMG Noble (ex-Azul Integra, built 2004).
In announcing the asphalt carrier redeliveries, chairman Wang made mention of US sanctions against a charterer referred to as Group A, described as “one of the largest global shipping and logistics groups in the world”. Shun Yuen has previously named the charterer as Guangzhou-based Cosco Southern Asphalt.
“The group considers that there is a risk of the group’s vessels to be sanctioned by the US as well if the scope of the said sanction is to be expanded,” Wang wrote, characterising the terminations as mutually agreed and amicable.
The company expects no long-term material adverse impact from the redeliveries.
