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Odfjell will ‘most likely’ cancel five more gas carriers at Sinopacific yard

Odfjell will ‘most likely’ cancel five more gas carriers at Sinopacific yard
Odfjell has revealed that it will “most likely” cancel orders for a remaining five LPG/ethylene gas carriers at China’s Nantong Sinopacific Offshore & Engineering (SOE) due to delivery delays.

Odfjell has booked a total of eight LPG/ethylene gas carriers at the Chinese shipyard, comprising of four 17,000 cu m vessels and four 22,000 cu m vessels following a contract signing in October 2013 and the exercising of options in May 2014.

As at end-September, Odfjell has terminated the shipbuilding contracts for three 17,000 cu m gas carriers, the company announced in its latest financial results.

“The construction of our newbuildings continues to be substantially delayed. We will most likely cancel the remaining five orders when we are in a cancelling position,” Odfjell said.

The four 17,000 cu m ships were originally scheduled to be delivered between October 2015 and May 2016, while the four 22,000 cu m ships were slated for delivery between September 2016 and June 2017.

“All instalments, including accrued interest, for the cancelled vessels have been refunded from the guarantor. Instalments paid on the remaining orders are secured by refund guarantees from reputable financing institutions,” the company added.

In August this year, debt-ridden SOE has gone into liquidation following a court decision. SOE is a subsidiary of financially troubled privately-owned Sinopacific Shipbuilding Group, whose other subsidiary Zhejiang Shipyard has filed for bankruptcy in May this year. Another subsidiary Dayang Shipyard has ceased operations due to a lack of cashflow.

For Odfjell’s chemical tanker business, the company last week confirmed orders to build four stainless steel chemical tankers at China Shipbuilding Trading and Hudong-Zhonghua Shipbuilding (Group), subsidiary of state-owned China State Shipbuilding Corp (CSSC). The deal comes with an option for four more sister ships.

Meanwhile, Odfjell posted a third quarter net profit of $16m, more than doubled the profit of $7m in the same period of 2015. Revenue was recorded at $240m, down 13% year-on-year.

“Slower global trade growth and a weaker outlook on economic growth are impacting the shipping markets, and the negative sentiment across shipping segments is also affecting the chemical tanker markets,” Odfjell stated.

“A weak CPP market continues to push swing tonnage into the chemical tanker market, which is disturbing a market which we believe continues to be fairly well balanced. The result is a weakening of the chemical tanker spot market which will affect the fourth quarter.”

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