Government-controlled Cosco, whose businesses include container and dry-bulk shipping as well as port operations, reported a net loss of 1.53 billion yuan ($243 million) for the three-month period ending Sept. 30, down from CNY2.07 billion a year earlier.

Revenue rose 4.6% to CNY19.06 billion from CNY18.23 billion.

The international shipping industry, often seen as a barometer of the global economy’s health, has been hurt by Europe’s debt crisis and oversupply of shipping capacity.

The Baltic Exchange Dry Index, which tracks the cost of shipping raw materials and is widely considered a leading economic indicator, has fallen sharply in the past year.

As of June 30, the company had a dry-bulk fleet of 357 ships, including 130 ships chartered from other companies.

- Colum Murphy, (c) 2012 Dow Jones & Company

SHENZHEN–Shipping giant China Cosco Holdings Co. (1919.HK, 601919.SH) is teaming up with its Shanghai-based archrival to jointly operate major domestic routes amid the global downturn, fuelling speculation that a merger between the two state-owned firms is in the works.

In their first domestic tie-up, Cosco and China Shipping Container Lines Co. (2866.HK, 601866.SH) will pool capacity on container routes operating to and from the eastern Fujian province, with plans to further expand domestic cooperation in the future. On Wednesday, Cosco Vice Chairman Ma Zehua said the firms are also looking at jointly operating international routes.

“As an individual company we won’t be able to fight the downturn…so we’ll forge more cooperation with China Shipping,” Mr. Ma said on the sidelines of a shipping conference in the southern city of Shenzhen.

China’s transition into a more market-based economy has encouraged competition among state-owned enterprises, pitting Beijing-based Cosco–the nation’s shipping icon with a 51-year history–against the smaller China Shipping. For years, the two companies competed directly on major international shipping routes, benefiting from robust demand from the West for Chinese-made consumer goods.

Though Cosco, with its vast ports and bulk-shipping assets, has built up a more-significant global profile than its main competitor, it made bad bets on China’s continued rise, boosting capacity just as the shipping market collapsed, sinking the firm deep in losses.

Cosco, the world’s fourth-biggest container shipper by shipping volume, reported a first-half net loss of 4.87 billion yuan (US$779 million), far underperforming eighth place China Shipping’s CNY1.28 billion loss, as the global industry suffered from low shipping rates with demand, particularly on European routes, remaining lackluster.

Cosco is on track to report a second consecutive annual loss, adding to last year’s loss of CNY10.5 billion yuan. If losses extend into a third year, the company would be delisted in Shanghai, under the exchange’s regulations. Cosco’s shares also trade in Hong Kong.

Cosco’s financial weakness is raising concerns that the company will need additional capital from the market or even a bailout from the government, which controls more than half its stock. Cosco’s difficulties are also bringing forth speculation among analysts that China may want to combine the nation’s two main shippers.

A high-profile courtesy visit this year to China Shipping’s headquarters by Cosco’s charismatic chairman, Captain Wei Jiafu, as well as numerous middle- and senior-management swaps between the groups, further drummed up expectations of a possible merger.

Cosco’s Mr. Ma on Wednesday acknowledged that the merger speculation is rife. “Since the beginning of this year, senior executives of the two companies have had more communication,” the executive said, though he stopped short of denying the merger plans.

“I’m aware of the rumors of a possible merger, but it’s just speculation and I’m afraid I won’t be able to give you any satisfactory answer,” he said, while to declining to comment on a possible government bailout.

An executive at China Shipping, who declined to be named, said Wednesday that any decision on a potential merger between the two companies will need to be made by China’s State-owned Assets Supervision and Administration Commission, or Sasac, which oversees the nation’s key state-owned enterprises. The executive declined further comment.

Sasac controls China Ocean Shipping (Group) Co., the parent of listed Cosco Holdings, as well as China Shipping Group, the parent company ofChina Shipping Container Lines.

“There is no economic rationale for China to have two large carriers that compete with each other in both international and domestic markets,” said Tan Hua Joo, executive consultant at ship consulting firm Alphaliner, on the sidelines of the Shenzhen conference.

Mr. Tan said he believes the recently disclosed domestic cooperation between Cosco and China Shipping was driven partly by excessive competition that has hurt both companies, noting it makes sense to have one big national player.

Still, analysts said political hurdles in China may hold back any merger in the foreseeable future, as the operations of many state-owned firms are intertwined with regional political interests.

“From an overall perspective, the merger would be a perfectly logical move to do,” said Lars Jenson, chief executive at consultancy SeaIntel Maritime Analysis. “But the caveat here is whether or not the Chinese [government] is politically willing to let this happen. That would be the major obstacle.”

By Joanne Chiu and Colum Murphy

View of a South Korean Coast Guard cutter. Photo by USCG Petty Officer Jonathan Cilley

(Bloomberg) — A Chinese fisherman died from injuries sustained in a South Korean coast guard raid after his vessel entered South Korean waters in the Yellow Sea, adding to heightened tensions sparked by maritime disputes in the region.

South Korea’s foreign ministry notified the Chinese embassy in Seoul about the death and will investigate the incident, the ministry said in a text message to reporters. The ministry expressed regret over the “unfortunate” incident and sent its condolences to the dead fisherman’s family, it said.

Chinese fishing crews have clashed repeatedly in recent years with the coast guards and commercial vessels of nearby countries, including South Korea, Vietnam and Japan. Yesterday’s killing comes amid heightened tensions with Japan over islands claimed by both sides in an area of the East China Sea rich in fish, oil and gas.

The raid on two vessels occurred at 3:45 p.m. yesterday in southwestern waters, according to the coast guard statement. Yonhap News reported that a coast guard officer shot and killed the man during a raid on 30 Chinese boats fishing illegally in the area. A separate Korean-language Yonhap report said the fisherman was killed when he was hit by a rubber bullet.

China filed a protest to South Korea and expressed “serious concern” over the incident, Chinese Foreign Ministry spokesman Hong Lei said at a briefing in Beijing today. He said China demanded an investigation and wants South Korea to “take concrete measures to prevent violent law enforcement and similar incidents from happening again.’”

Officer Stabbed

Last year, a Chinese sailor stabbed and killed a South Korean Coast Guard officer during a raid on his ship. South Korea occasionally seizes Chinese ships. In 2010, two Chinese sailors were killed when their boat overturned and sank after ramming a South Korean Coast Guard vessel.

China’s territorial dispute with Japan sparked protests in several Chinese cities last month and strained a trade relationship worth more than $340 billion.

Speaking at a briefing in Bangkok yesterday, U.S. Pacific Commander Admiral Samuel Locklear said the U.S. seeks a “peaceful environment” in the East and South China seas. He said it’s important to “recognize these will be difficult issues.”

Rival maritime claims among half a dozen Asian nations have fueled tension this year ahead of China’s leadership transition. China is establishing a military garrison on a disputed island, while the Philippines, Vietnam, Malaysia, Taiwan and Brunei are asserting their own claims.

Philippine President Benigno Aquino today said he sees “more room” to discuss territorial disputes with China after it completes its leadership change at a Communist Party congress that begins next month. The Southeast Asian nation wants to resolve the issue “amicably” and there are currently “no back channel efforts” with China, he said.

By Sangwon Yoon, © 2012 BLOOMBERG

A Type 052C Luyang II-class destroyer

By Gabe Collins and Andrew Erickson

Now that the People’s Liberation Army Navy (PLAN) has commissioned its first aircraft carrier and may be looking to assemble one or more carrier groups over time, what about the rest of the fleet?

One development that carries broad implications for the enhancement of Chinese sea power is the recent launch of the first editions of the new 6,000-ton Type 052D Luyang III-class destroyer, which marks a new stage in the PLAN’s prolonged period of experimentation with different destroyers.

The Type 052D represents an evolution of the existing Type 052C Luyang II-class destroyer. The latter are now in mass production, with 8 hulls in service, the first commissioned in 2004. At least six 052Cs have been launched since the end of 2010, according to Chinese media reports, of which two are reportedly in service at present. Beijing appears to have decided that the Type 052 series, a rough analog of the Arleigh Burke-class destroyers that form the backbone of the U.S. Navy, is the latest class of warship whose design is good enough to justify large-scale production.

While China mass-produced lower-quality Romeo- (Type 033) and Ming-class (Type 035) submarines and Jianghu-class (Type 053) frigates in an earlier era, today’s large-scale warship production meets much higher standards and is geared primarily to replacing older vessels entering mass obsolescence rather than expanding the fleet numerically. That said, it is well within China’s shipbuilding capabilities to both boost the quality of the fleet and boost its numerical strength, should the country’s leadership decide to do so.

If China fielded 10-15 advanced destroyers like the Type 052D, it would, holding other numbers constant, become the second-largest surface combat force in the Asia-Pacific region after the U.S. Navy. Given the rapid ramp-up of Type 052C production in the past several years, we think the prospect of similar mass production of the Type 052D is quite possible. As a mass-produced vessel class, the Type 052D may now be joining China’s 60+ Houbei-class (Type 022) missile catamarans, 16-19 Jiangkai II-class (Type 054A) air defense frigates, 13 Song-class (Type 039) and 8-9 Yuan-class (Type 041) conventional submarines, and 3 Yuzhao-class (Type 071) amphibious assault ships.

Why mass production of the Type 052D matters strategically

The Type 052D’s emergence suggests that China’s naval shipbuilding capability is maturing further, with China State Shipbuilding Corporation (CSSC) ‘s new shipyardon Shanghai’s Changxing Island becoming a capable facility for constructing modern surface combatants. It offers further evidence that China can produce warships quickly using modular construction techniques and perhaps other advantages such as lower cost labor than its competitors can access. Series production tends to reduce unit costs because shipyard workers and suppliers find ways to increase efficiency as they spend significant time and energy on the same tasks and improve their operational practices.

Analysis by RAND ( pdf) demonstrates that doubling the procurement rate of warships in the U.S. decreased unit costs by 10%. Given that Chinese shipbuilders are still building up their modern naval construction industrial base, the efficiency gains in China are likely to be larger as domestic efficiency increases and Chinese manufacturers displace foreign parts that may cost more.

The modular construction capabilities now on display in CSSC’s yards took time to develop, but now China’s warship builders are creating a wide and deep base of expertise in the area. CSSC has been employing such techniques on the Jiangkai series frigates, the first hull of which was commissioned in 2005, as well as the Type 052C and now the Type 052D. This shows that at least three different Chinese shipyards are now able to mass produce advanced surface combatants, which demonstrates that China’s military shipbuilding institutions are clearly becoming “learning organizations.”

The 052D differs significantly from its predecessor the Type 052C in several important ways. It has a completely different type of vertical launch system (“VLS”), with missile canisters instead of what look like revolvers; a different gun system; and what appear to be bigger phased-array radar faces. The VLS system is potentially the biggest development. The 052C’s likely complement of 64 VLS tubes with a more advanced surface-to-air missile (“SAM”) will offer strong area air defense capability, which can enhance the combat effectiveness of other PLAN surface ships and submarines by protecting them from enemy strike and anti-submarine warfare aircraft.

Meanwhile, China’s long-established cruise missile industry is producing a wide range of extremely capable anti-ship cruise missiles (ASCMs). China’s record to date of developing advanced ASCMs gives every reason to believe that new variants of even greater capability will continue to emerge and be outfitted on PLAN vessels like the Type 052D.

Strategic questions moving forward

A host of important questions remain regarding the Type 052D, the answers to which would help military planners and policymakers outside of China better understand the impact that the ship is likely to have. The answers to many of these questions–for instance, how good shipboard electronics systems are and how well crews can use their ship to fight modern battles–will become clearer over time as the PLAN makes decisions regarding operational approaches and training intensity and more Chinese sailors gain experience through both tours in the Gulf of Aden and exercises closer to home.

The Type 052D appears to be a very modern warship that, with continued improvements in China’s maritime surveillance and targeting infrastructure and more intensive training of crews, can help make the PLA Navy even more formidable throughout the Asia-Pacific region. Regional neighbors such as the Philippines, Vietnam, Japan and South Korea are likely to respond by augmenting their ownnavies and reaffirming diplomatic and security ties with the U.S.

Andrew Erickson is a professor at the U.S. Naval War College and a research associate at Harvard’s Fairbank Center. Co-founder of China SignPost, he blogs at www.andrewerickson.com.

Gabe Collins is co-founder of China SignPost, founder of ChinaOilTrader.com and is a J.D. candidate at the University of Michigan Law School.

(c) 2012 Dow Jones & Company, Inc.

COSCO Guangzhou, image via Wikipedia

SINGAPORE–Cosco Corp. Ltd. (F83.SG) said Wednesday its net profit in the fiscal second quarter fell 13% as revenue from its shipyard operations fell and flagged a cautious outlook for the year.

Cosco’s net profit was S$27.6 million in the April-to-June quarter, compared with S$31.9 million last year, the shipbuilder said in a statement to the Singapore Exchange, where it is listed.

Revenue fell 2% to S$975 million. Revenue from the company’s shipyards business, which makes up 98.5% of the total, fell 2.2% to S$960.8 million, Cosco said in the statement.

“With excess capacity in the shipping industry and the uncertain global economic conditions, shipowners may be reluctant to place new orders for vessels and the group may experience a decline in new orders in ship building,” the company said, adding that it expects business and operating conditions in the rest of the year to remain difficult and challenging.

- Gaurav Raghuvanshi, (c) 2012 Dow Jones & Co

Coal terminal, image (c) Shutterstock

(Bloomberg) — Record coal stocks at power plants in China, the biggest consumer of the fuel, are threatening to reverse the rally in rates for commodity carriers and diminish returns for ship owners to the lowest in more than a decade.

The utilities have 91 million metric tons in reserve and stockpiles at the largest ports come to more than 90 percent of capacity, according to the China Coal Transport & Distribution Association and SteelHome, a Shanghai-based research company. Panamax rates will drop 48 percent to an average of $5,000 a day this quarter, said Steve Rodley, managing director at Global Maritime Investments Ltd., which operates 64 ships. He correctly predicted a slump in earnings for larger Capesizes in March.

China cut borrowing costs for a second time in a month on July 5, seeking to boost growth that slowed for five consecutive quarters. Electricity output, about 75 percent of which comes from coal-fired generators, rose at the slowest pace in three years in April and May, government data show. The Panamax fleet, which carries more coal than any other commodity, will expand at about three times the pace of cargoes this year, according to London-based Clarkson Plc, the world’s biggest shipbroker.

“Chinese coal demand is so low right now,” said Jeffrey Landsberg, the New York-based managing director of Commodore Research & Consulting, an adviser to ship owners. “The Panamax market will be under pressure throughout this quarter, first and foremost due to a significant oversupply of vessels.”

Crop Cargoes

Earnings for the 750-foot-long ships jumped 21 percent to an average of $9,630 in the second quarter as owners cut speeds and anchored vessels and South American crop cargoes surged after harvesting. Rates were at $9,128 yesterday, 29 percent lower than at the start of the year, according to the London- based Baltic Exchange, which publishes prices covering about 75 percent of global commodity cargoes.

Rodley’s forecast is below the $8,925 predicted by forward freight agreements, handled by brokers and used to bet on future transportation costs. The third-quarter contract declined 12 percent compared with April 20, its high point for 2012, according to Clarkson.

Ship owners need about $13,000 to break even once financing charges are included, estimates Arctic Securities ASA, an Oslo- based investment bank. Basic operating costs including crew and insurance are about $6,500, according to a London-based unit of Moore Stephens LLC advising the industry.

Slowest Advance

China’s thermal-coal imports will increase 8.4 percent to 110.8 million tons this year, the weakest growth since 2008, according to Clarkson. That will contribute to a 4.9 percent gain in global seaborne trade in the fuel, the slowest advance since 2009, the broker estimates. Coal is the world’s third- biggest commodity cargo after oil and iron ore.

Expanding Chinese power capacity may increase demand for coal imports. There are at least 26 coal-fired plants being built with a combined output of 21,411 megawatts, equal to 6.6 percent of existing capacity, according to data compiled by Bloomberg.

Panamax rates also may climb on demand to haul other cargoes. A shortage of vessels in the Atlantic region during the South American harvest drove rates 64 percent higher in April, according to RS Platou Markets AS, the investment-banking unit of Norway’s largest shipbroker. U.S. and European farmers usually start gathering wheat, corn and soybeans this quarter.

Owners may seek to shore up rates by slowing down or idling vessels. Anchored Panamaxes averaged 552 last month, compared with 396 a year earlier, according to ship-tracking data compiled by Bloomberg. Speeds averaged 8.7 knots in June, from 9.25 knots in June 2011, the figures show.

Higher Rates

While the rally in Panamaxes may be reversing, equity analysts still expect shipping companies to advance. Shares of Golden Ocean Group Ltd. will gain 16 percent to 4.58 kroner in Oslo trading in the next 12 months, the average of 10 estimates shows. The Hamilton, Bermuda-based operator protected itself by locking in charters at higher rates, said Martin Korsvold, an analyst at Pareto Securities AS in Oslo.

Shares of DryShips Inc., which operates 29 Panamaxes, will advance 43 percent in the next 12 months, the average of eight estimates shows. The Athens-based company got 65 percent of its revenue from drilling rigs and drillships last year, rates for which are still rising, according to data compiled by Bloomberg.

The Panamax fleet grew 37 percent to 2,083 vessels since the end of 2007 as rates that rose as high as $94,977 that year spurred owners to expand, according to IHS Inc., an Englewood, Colorado-based research company. Outstanding contracts at ship yards are equal to 33 percent of existing capacity, more than for any other type of bulk carrier, the data show. Clarkson is predicting growth of 14 percent this year, the most since 1983.

Vessel Classes

The glut extends to other vessel classes. Earnings for Capesizes, which carry coal and iron ore, slumped 67 percent since the start of the year, according to the Baltic Exchange. Rates for very large crude carriers, hauling about 2 million barrels of oil, dropped 27 percent, Clarkson estimates.

China’s electricity production rose 3.2 percent in May after advancing 1.5 percent the previous month, according to data from the state-owned China Economic Information Network. Excluding a 5.1 percent decline in January, when factories were shut for the weeklong Lunar New Year holiday, they were the smallest gains since 2009.

China’s need for more coal also may weaken on a jump in alternative power sources. Hydropower generation in June rose by an amount equal to as much as 7 million tons of the fuel, or 88 Panamax cargoes, according to estimates from Commodore Research & Consulting. Thermal coal accounted for about 80 percent of the cargoes in single-voyage Panamax charters in the past 12 months, Morgan Stanley estimates. The fleet’s five busiest ports are all in China, ship-tracking data compiled by Bloomberg show.

“The Chinese have been stockpiling for some time, and their yards are very, very full,” said Rodley, whose company makes money by trading the difference between freight derivatives and rates for its 64 ships. “The oversupply is huge. It’s hard to find anything positive to say.”

This 57000 DWT bulk carrier was lauched from Guangdong shipyard in 2011, image: COSCO

COSCO Corporation (Singapore) Limited announced today that COSCO Zhoushan Shipyard Co., a subsidiary of the Company’s 51% owned COSCO Shipyard Group Co., has delivered a bulk carrier of 57000 DWT, SUPERIOR, to a European buyer.

The delivery documents were signed by and between COSCO Zhoushan and the buyer on 26 June 2012.

The bulk carrier measures 189.99 meters in LOA (length of all), 32.26 meters in breadth and 18 meters in depth.

China Marine Surveillance Ships On Patrol In The South China Sea

The New Great White Fleet – Will China’s fleet of secret surveillance ships soon outnumber the US Navy?

It has been over three years since China made the drastic, but failed, attempt of ordering the U.S. Navy ocean surveillance ship, USNS Impeccable, to leave the South China sea. The order ratcheted tensions between the US and China but resulted in little more than political volleys being thrown between the two countries. China has not given up however on claiming almost the entire body of water as their own, demarcating their claims within what is known as the nine-dotted line. A line which overlaps the borders of virtually every other country in the region.

Rather, they have turned their attention from military to commercial vessels in the area.

Three weeks ago, the Philippine Department of Foreign Affairs expressed “grave concern” in a statement to the Chinese Embassy after a fleet of Chinese vessels around Scarborough Shoal, a rich fishing ground just 123 miles (198 km) west of the former American stronghold of Subic Bay Phillipines and well within that country’s Economic Exclusion Zone, began harassing local boats Tensions increased between the both countries until yesterday when both nations, citing the arrival of typhoon season, ordered the pullback of vessels in the region.

While many local fishermen argued against the pullback, the orders come from the top and carry the weight of their country’s presidential seal. News first appeared over the weekend of Philippines’ president Benigno S. Aquino’s ordered that all Philippine vessels return to port citing the rough seas and heavy rains of three tropical storms which currently surround the island nation. It is hoped that China follows suit and a diplomatic solution for each nations sovereignty claims are found.

“We hope there will continue to be an easing in the situation and hope bilateral cooperation will recover and be safeguarded,” said Chinese Foreign Ministry, Hong Lei on Monday.

Some maritime experts in the region believe however, that tensions will again escalate after the menacing typhoons disappear.

Worries extend not only over the larger nation’s diplomatic claims over the region – claims in which China argues span centuries of maritime history – but in China’s increasing military strength in the region. At the heart of the problem is the aggressive newbuild strategy of the China Marine Surveillance (CMS) agency, a paramilitary maritime law enforcement agency created on 19 October 1998 under the auspices of China’s State Oceanic Administration and responsible for law enforcement within the territorial waters, exclusive economic zones (EEZ) and shores of the People’s Republic Of China.

Does history repeate itself?

Painted white with the English words, “China Marine Surveillance” emblazoned in tall blue letters across the sides of their hulls, the vessels being built for CMS are reminiscent of the great battleships built by the United States at the turn of the last century. Those ships, were painted gleaming white to represent the peacetime stance of America’s naval power, but color aside, the primary purpose of those vessels were to enforce the Roosevelt corollary to the Monroe Doctrine, which allowed the United States to “exercise international policy power” and keep smaller countries on their feet. The vessels, later referred to as America’s Great White Fleet, also surved to enforce America’s claim over foreign territories won in the Spanish American War. Territories which included the Phillipines.

CMS’s ships approximate the size Roosevelt’s battleships – the largest being just 20 meters shorter in length than the dreadnought USS Carolina, but they are by no means modern battlewagons capable of projecting military might. Rather, the ships are lightly armed law enforcement vessels that, without external armament, look less intimidating than a US Coast Guard coastal patrol ship.

While the CM ships are relatively small, between 78 and 98 meters in length, and may be only lightly armed, they are certainly enough to intimidate fishing vessels and may prove effective in future actions against larger targets.

Can small arms intimidate oil rig workers?

The CMS fleet has the proven audacity and speed to harass vessels of sizes ranging from small fishing boats to the 281 foot (85.78 m) USNS Impeccable, but unarmed fixed structures may be the primary target. Agency vessels are keeping a close eye on offshore oil and gas structures in the region and, in March of this year, CMS issued a press release citing the successful surveillance of “illegal exploration of oil and gas fields” in the South China Sea. The fields in question are located off the coast of the Senkaku Islands (known as the Diaoyu Islands in China), a group of uninhabited islands Japan claimed following a 1969 UN survey which reported likely oil and gas reserves in their adjacent waters.

In addition to Japan, CMS is watching other efforts to develop oil and gas fields in the region and, last November, a YouTube video was released by a Vietnamese commercial ship harassed while supporting offshore oil and gas exploration activities off the coast of Vietnam.

Are Commercial Ship Escorts?

While the efforts of China’s Marine Surveillance (CMS) agency have been mostly restricted to surveillance of military and commercial vessels engaged in activities within the region, last week brought news of a development which may disturb the average mariners.

According to Indian newspaper The Hindu, a small convoy Indian naval ships left the Philippines earlier this month headed for South Korea when they received an unexpected message from a Chinese warship: “Welcome to the South China Sea, Foxtrot-47,” buzzed a People’s Liberation Army Navy (PLAN) frigate to the INS Shivalik (F47).

Disturbing to Indian officials was the fact that this was not a CMS vessel undergoing a routine harassment but a fully armed naval ship tracking the movements of a sovereign nation through international waters. According to news reports the Chinese warship escorted the four Indian vessels for 12 hours while they transited one of the world’s most important waterways.

“The tone of the message was welcoming, but was also as though we were entering Chinese waters,” an official told The Hindu. The Chinese ship left the Shivalik’s side after 12 hours, revealing that it had been instructed to move away by a message from PLAN headquarters.

This aggressive move surprised some Indian navy officials who where prepairing to meet with their counterparts in China. According to The Hindu, both countries will this year hold a first-ever maritime dialogue, and have also stepped up coordination in joint anti-piracy exercises in the Gulf of Aden in the Indian Ocean.

The question on the minds of mariners transiting the region is “What’s next”. Only time will provide the answer but it is clear that China has definate plans for the future. According to the British newspaper The Telegraph, CMS is currently planing to have 16 aircraft and 350 vessels by the end of 2015, and more than 15,000 personnel by 2020 the possibility, the fleet will have the capability to conduct close surveillance missions throughout the South China Sea. The telegraph also claims the maritime surveillance forces logged the transit of 1,303 foreign ships and 214 planes in 2010, up from a total of 110 vessels tracked in 2007. “The logical next step is actively monitoring those 1,300 vessels” said on US Navy expert who did not want to be named. ”  With 350 vessels, a number approaching the entire US Navy operational fleet, they will have the capability to both track and escort a majority of ships transiting the region.”