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Chinese yards move to limit losses

Chinese yards move to limit losses

London: Chinese shipyards are charging penalties to international owners who wish to defer delivery of new ships and are filling the resulting spare capacity with cut-price domestic contracts. At this stage the clandestine strategy cannot be confirmed but appears to follow similar moves to soak up excess shipbuilding capacity in decades past. These include so-called "shikumisen" deals in Japan in which foreign shipowners were encouraged to build ships at the country's struggling shipyards for subsequent long-term charter to Japanese cargo interests. So far, however, it is not clear who is placing the "fill-in" orders in China but sources say the ships are likely to be very standard in spec, built to Chinese class, flying the country's flag and knocked out very quickly.
It is possible that the moves form part of a central strategy to assist ailing shipyards, or it may have come as a result of deals between yards, domestic owners and Chinese charterers. The deals could assure the long-term delivery of key raw materials at a cost known and guaranteed in advance, without recourse to the vagaries of the dry bulk shipping market. One source, who spoke on the condition of anonymity, said that if these moves are confirmed, they demonstrate another way in which independent shipowners may have shot themselves in the foot.
Rather like the world's leading miners - including Vale and Rio Tinto - Chinese receivers were outraged at paying exorbitant freight rates on basic imports vital for their core business during the recent dry-bulk boom. Locking in shipping capacity at very competitive rates would ensure the long-term supply of raw materials at a fixed delivered price. It would also reduce reliance on independent ship owners, thereby cutting bulk shipping demand in the open market.  [18/05/09]


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