On April 29, COSCO Shipping Holdings Co., Ltd. issued an announcement that the 14 wholly-owned subsidiaries of its holding subsidiary Orient Overseas signed a total of 14 shipbuilding agreements with Nantong COSCO Shipping Kawasaki or Dalian COSCO Shipping Kawasaki to order a total of 14 18,500TEU methanol dual-fuel powered container ships at a price of US$220 million (equivalent to approximately RMB 1.585 billion). The total price of this transaction is US$3.08 billion (equivalent to approximately RMB 22.189 billion) and is paid in US dollars.
This transaction has been reviewed and approved by the 18th meeting of the 7th Board of Directors of COSCO Shipping. The announcement shows that among the 14 methanol dual-fuel container ships, Nantong COSCO Shipping Kawasaki will build 5 of them, and Dalian COSCO Shipping Heavy Industry will build another 9. The new ship is expected to be delivered between the third quarter of 2028 and the third quarter of 2029.
China COSCO Shipping pointed out that the target of this transaction is 14 18500TEU methanol dual-fuel powered container ships. COSCO Shipping has previously inquired about prices from several shipyards (including two independent third-party shipyards). One of the independent shipyards failed to quote due to limited production capacity and resources. The other independent shipyard's basic quotation is higher than that of Nantong COSCO Shipping Kawasaki and Dalian COSCO Shipping Kawasaki, and the delivery timetable is even later. According to the group's requirements for price, technical capabilities and delivery schedule, after comprehensive evaluation, Nantong COSCO Shipping Kawasaki and Dalian COSCO Shipping Kawasaki have comprehensive advantages over independent third-party shipyards in terms of ship manufacturing technology, quality control, ship delivery schedule and ship price.
In addition, before this transaction, Nantong COSCO Shipping Kawasaki and Dalian COSCO Shipping Kawasaki have built 34 ships for COSCO Shipping since 2020 (including 12 24,000TEU methanol dual-fuel powered container ships ordered in 2022), and have a better understanding of the operation and technical specifications, requirements and standards of the newly built ships of COSCO Shipping. Therefore, the selection of Nantong COSCO Shipping Kawasaki and Dalian COSCO Shipping Kawasaki as the builders of this ordering ship is expected to have a synergistic effect.
This transaction is in line with China COSCO Shipping's long-term development strategy of steadily improving fleet capacity, achieving long-term balanced development, further consolidating its industry position and continuously promoting the global development of container transportation business. This custom ship is of many purposes and is suitable for operating on a variety of trade routes and terminals. With the joining of the fleet by this customized ship, COSCO Shipping will achieve more balanced development in the global service network and enhance its core competitiveness in traditional and emerging markets.
This customized ship can gradually replace old ships, which will help optimize the fleet structure of COSCO Ocean Control. In addition, this customized ship will be equipped with green fuel technology (such as methanol dual-fuel engines), which will reflect COSCO Shipping’s support for global energy conservation, emission reduction and sustainable development strategies, and respond to customers’ demand for a zero-carbon supply chain. In addition, the increase in average container position of a single ship will bring economic benefits to scale, reducing the cost of a single container, and enhancing the competitive advantage of COSCO Shipping's operating cost.
COSCO Shipping said that this transaction has potential risks including financing risks and shipping market fluctuations. However, given the group's cash flow and debt levels in recent years, the Group's strategic deployment of ships can flexibly extend or terminate some of the Group's ship leasing to adjust its capacity in the future according to market conditions. The relevant risks involved in this exchange are reasonable and controllable, and the risk level generated by this exchange is similar to the risks generated by independent third-party shipyards for exchanges.
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