China to buy up cancelled newbuildings

Friday, 20 March 2009 12:25

China Shipping Development and Sinotrans Shipping could be encouraged by Beijing to take on some of the vessels cancelled by foreign owners to support Chinese shipyards. Macquarie Research analyst

Jon Windham estimated that more than 50% of the vessels on order at Chinese shipyards are from European customers and are at significant risk of cancellation.

 

He said that China Shipping Development and state-owned shipping enterprises including Sinotrans Shipping "would be a potential conduit for the government to fund new ordering to offset foreign cancellations". Such a move "would be to facilitate the Chinese government's stimulus effort for shipyards".

The Chinese government's shipbuilding aid package announced in February included extending tax rebates and other financial support to Chinese shipyards until 2012, and a drive to scrap older vessels.

A possible way forward is for Sinotrans Shipping to assume cancelled newbuild orders and match them with longer-term contracts with Chinese customers who continue to secure commodity ownership overseas. China Shipping Development has done similar long-term deals with large state-owned enterprise customers.

Source: Motorship