China is on a bulk-building spree in a bold bid to take the extreme volatility out of the market.
Chinese steel giant Baoshan Iron & Steel Co (Baosteel) this week announced the launching of its first very large ore carrier.
The 230,000 dwt Renda slid out of CSSC Guangzhou Longxue Shipbuilding, a new yard in Guangdong’s provincial capital. It will be commissioned in May, according to mainland reports.
The ship belongs to Haibao Shipping, a joint venture between Baosteel Resources and China Shipping Development. It is the first of four 230,000 dwt and two 300,000 dwt bulkers.
They don’t call the ships “very large ore carriers” for nothing and with a draft of over 20m, the vessels will more than likely operate on shuttle runs from deepwater ore exporting ports in Brazil and Australia to China. Most of the iron ore is offloaded in China’s northern ports of Qingdao, Rizhao, Tianjin and Lianyungang.
Baosteel is building these large carriers so it can control its own supply chain. For the huge mainland raw material suppliers, and for Beijing, having mainland vessels on hand to transport the grist for its economic mill is crucial for the stabilizing of prices and the guarantee of space amid a volatile market.
This was borne out by a recent HIS Fairplay report in which senior consultant Niklas Bengtsson said contracts for the building of 143 million dwt would be signed by 2013. This, he said, was the effect of China wanting to transport its cargo on its own vessels and raw material suppliers securing tonnage for deliveries.
For China, securing its own transportation will enable Beijing to focus its energy on bringing down the prices of raw materials such as iron ore. Global ore suppliers are asking for an 80-90 percent increase in benchmark prices.
China has a bulk orderbook of 3,783 ships, with 33 orders being placed in January, according to Bengtsson. That’s a lot of ships, but if the mainland’s state-owner carriers aren’t subjected to the same supply-demand volatility as the rest of the market it may be a good move.