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Chinese bulker puzzle

Shanghai: The likely cancellation of a growing number of bulk carrier newbuilding contracts has offered dry bulk owners a shred of hope for the future. But there is now growing concern that the Chinese may be planning to proceed with many of the contracts placed at the country's well-established yards, if necessary for their own account.
Still reeling from the precipitous plunge in dry bulk rates and values, owners had welcomed some brokers' estimates that as many as half of the 3,400 bulkers on order might not be built as a result of the credit crunch. Speculative orders, in particular, by owners with little or no track record in the dry bulk sector were thought to be particularly vulnerable, as were contracts placed at so-called "greenfield" yards in China.
The cancellation predictions were particularly welcome to Capesize owners, who face the prospect of absorbing more than 800 new units over the next two or three years. Now there are worries that the dry bulk fleet will continue to expand exponentially, with a growing proportion controlled by Chinese interests with direct access to mainland charterers. As a result, some say, there could be a lower volume of cargo business available on the open market.
By far the largest chunk of the dry bulk orderbook - nearly half in number - is on order in Chinese yards where shipbuilders have geared up to construct nearly 350 Capesize vessels, almost  400 Panamax units, more than 500 Handymax ships and 370-odd Handysize vessels, according to Clarkson statistics.  Altogether, the 1,640 bulkers contracted at Chinese yards represent an investment estimated at about $82bn. In contrast, South Korean builders have 630 bulkers on their books, with contracts valued at less than $38bn.
It is in the large sizes where concern is greatest. Not only has there been a record level of contracting in this size range recently, but large bulkers are less flexible as regards employment, both in terms of routes and cargoes. The Capesize fleet, which grew by almost 9% in 2008, is forecast to expand by a massive 18.5% this year, although slippage could shave a couple of percentage points of this figure in the months ahead.  [20/01/08]


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