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Vale and Rongsheng 'marriage' heads for divorce

Beijing: Ship cancellations are now stacking up. John Swire & Sons affiliate China Navigation has confirmed it has 'postponed' its first newbuilds for ten years. The six 40,000 dwt multipurpose vessels costing a combined $360m were nixed as the yard, Nantong Mingde, was five days late in signing the refund guarantee.
'The orders are postponed,' confirmed China Navigation's md, Richard Kendall from Hong Kong. 'We expect to reengage once the dust settles in the capital markets and on [newbuild] pricing,' he added.
Far more significant is the continuing speculation that Brazilian iron ore giant has scrapped plans to build twelve 400,000 dwt iron ore carriers worth $1.6bn at Jiangsu Rongsheng Shipbuilding and Heavy Industry (pictured), a new yard with blue chip investors including US investment bank, Goldman Sachs. Both parties refuse to confirm the deal is over but sources across China connected to both parties suggest an announcement is imminent. Vale has had a tough time dealing with China since it tried to instigate a mid-year iron ore price hike. Its order this August at Rongsheng represented the largest ships ever ordered in China.
'The Vale/Rongsheng situation is what the Chinese might call "same bed, different dreams". Vale is not saying anything - and Rongsheng is saying the marriage is still on,' said one yard consultant. 'The ships are a baby that Vale is unlikely to want anymore though Rongsheng would like to see the deal consummated,' he added.
A broker in Shanghai said that if Vale has indeed cancelled its orders then 'Rongsheng has no reason to exist.'
Others to have ditched newbuild orders in the past 10 days include Eagle Bulk Shipping who are rumoured to have cancelled a series of supramaxes at Sinopacific Shipbuilding. Genco Shipping & Trading, meanwhile, has also scrapped a $530m order for bulkers, losing $53m in deposits in the process.
As of November 1 there had been 178 ship cancellations equalling 2% of world orderbook. Engine makers have confided that just about every shipbuilding option has been dropped. Analysts suggest this percentage could jump to anywhere between 30 and 50%.  [12/11/08]


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