Alexander the Great VLCC

The 297,958 MT VLCC, Alexander the Great, built by Universal Shipbuilding in 2010. Image: Capital Ship Management

There are a few headlines going around today in some major publications and by the Associated Press claiming that China has announced plans to build 50 supertankers.

That’s five zero.  Or in terms of capacity, 100 million barrels of additional capacity to the world oil market.

Right now, on the commercial (aka non-Communist) market, these same tankers are losing over $1,000 per day due to the fact that there are too many of them floating around, and the price of bunker fuel is costing shipowners a fortune.

We are in a downturn however, and as we all know, the shipping industry is highly cyclical and these 50 supertankers won’t be built overnight, in fact it’ll take years to build that many ships (and engines, and everything else that goes into a ship).

For Chinese shipbuilders, that’s a good thing because life really sucks for them right now.  Rongsheng Heavy Industries, for example, has lost nearly 90 percent of its market value over the past two and a half years.  China Shipbuilding Industry’s stock, which is traded on the Shanghai exchange, has fallen over 28 percent in the past year and Hong Kong-traded, China Ocean Shipbuilding Industry Co. has fallen more than 44 percent.

It’s a precarious situation all around because according to reports from unidentified sources, factors that might spur such a huge order are market demand, company resources, and the costs involved.

Does anyone predict a market demand increase that might warrant such an order?  Anyone at all?

If we were talking about LNG ships, that’s one thing, but crude oil?  If there was such a need for crude oil, why wouldn’t China throw that money into offshore drilling rigs and production facilities and run pipelines or use FPSOs an shuttle tankers?

There are number of other companies who have plans to build large product tankers, but that’s primarily to keep up with developing market demand and new environmental regulations, while at the same time replacing older ships scheduled for demolition.

An order for 50 new VLCCs, by a communist country, does not appear to be one based on market economics.  In fact, it’s hard to see how an order such as this could do anything other than destroy the commercial market.

Personally, I don’t believe it’s true.

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  • João Henrique

    Candidates for FPSO conversions …

  • Ron

    “In fact, it’s hard to see how an order such as this could do anything other than destroy the commercial market.”

    And do you think that the long term aim of the communists is to do anything other than destroy the global commercial market?

  • Bill Martin

    I agree that the Chinese claim is spurious and doubtful. Given the current economic climate and potential future evolutions in energy demands, such construction would appear counterproductive to both the Chinese as well as the global shipping arena. Then again, the Chinese have been known to stipulate just for effect, and go off in a different direction.

  • http://www.facebook.com/LatchDaddy Calvin Holt

    It’s not out of the realm of possibity. Like their major infrastructure projects, they can use their trillions of USD currency to build up their floating pipelines. It keeps workers working, allows them to dominate a market and fulfill strategic needs.

  • http://www.facebook.com/ormond.otvos.9 Ormond Otvos

    Perhaps China is planning to increase their Navy and will change the nature of the ships publicly halfway through the building process.

  • Nick China

    Well, it was the Commercial Vessels. (non Communist) who delivered the raw materials to China in those heady days now long gone…..

  • http://gravatar.com/revolutionary9 revolutionary9

    Remember that the Chinese state control of heavy industry allows it to build infrastructure for it’s economy just like the U.S. did back in the “Great Depression” and if they see the building of super tankers as a way to build infrastructure and create jobs and so be it. How about when the U.S. government, on it’s own,decided to build the Panama Canal, after going to war against Colombia to secure the land needed for the enterprise, and with the building gave companies like General Electric and Westinghouse an oppurtunity to expand their reach? Is that OK to do for a State power?

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