Cosco and China Shipping form Singapore-based jv to own Valemaxes

The new joint venture, named China Ore Shipping, will be 51% owned by Cosco and 49% owned by CSDC, the Chinese firms announced to the stock exchange.

Cosco and CSDC will invest $168.3m and $161.7m respectively for the latest cooperation.

The latest development by Cosco and CSDC followed closely the recently concluded pact between Cosco and Brazil’s mining giant Vale, where Cosco will build 10 VLOCs and purchase a further four existing units from Vale for its charter, under a 25-year contract of affreightment (COA), including a five-year extension option.

The acquisition of the four secondhand 400,000 dwt bulkers valued at $445m will be made by China Ore Shipping from Vale Shipping Singapore. The vessel purchase will be funded by a mix of internal resources and bank loans.

Both Cosco and CSDC said that the joint venture “is expected to bring about a steady stream of income and believed the deal will benefit the company and its shareholders.”

The latest cooperation between Cosco and CSDC over the VLOCs may again fuel market speculations of a merger of the two big state-owned shipping conglomerates, after the two Chinese firms dispelled the speculation in mid-April that they did not received any notifications from the relevant authorities regarding the merger.

Jiang Ming, an analyst at Haitong Securities, pointed out that speculations of mergers between Chinese state shipping groups have already been in the market since 2010. Between December 2006 to 2010, the number of state-owned shipping firms has in fact dwindled to 80-100 from 161 as a result of an ongoing consolidation and mergers and acquisition.

Ma Zehua, chairman of the board of Cosco Group, had earlier mentioned that there has been greater cooperation between Cosco and CSDC, but the decision to merge does not lie within the corporations themselves.