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.
Maybe they will convert them to escort carriers (CVE).
Troop ships?
Candidates for FPSO conversions …
“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?
I think this is the way of thinking in former or present communist countries. I am from small small ex-communist country, it is named Slovenia. And since 21 yrs. we are "democratic" but we are still thinking in the same way. The only aim of the political remains is to have control and it does not mean anything how much it will cost.
As an example, to keep people down we move all “dirty” production from our country to “less expensive” labor cost, on beginning in Bosnia, than Bulgaria and now in China. But the price on the final market does not drop down, only the cost in between has fallen. And what is the situation now. There is all the time growing unemployment, mostly among young people and those over 50. So we are going to have what we are doing.
Believe me this part of the world is not thinking and deciding as we do, they want to destroy and then they will take over, but not with the same rights and way of life we came too after all this years of efforts and development.
Until our governments will not decide to: firstly protect their own population, second hold our own production in the whole range from lowest labor force, to the middle than will have also on the high level. Otherwise all know-hove will move to the places where the production is placed.
See what is happening on the European or OECD maritime market, there is a serious shortage of junior officers which will lead that we will not have any senior officers.
As director and Principal of Maritime school I note that in the past two decades we have more and more problems to obtain a position for our graduate as deck or engine cadets. This consequently, lead to a decline in interest among young people for entry into the school which will finally came that we will close.
It would be extremely sad to close the school and end the tradition and the amazing development that has been achieved through last 60+ years, just because the interest among the youngsters is currently low.
Interest among the new generation can be generated using the right marketing tactics and recruitment strategies. With a proper integrated campaign we can start filling the capacities again.
Instead in the same time, the European ship-owners invest resources rather than at home, in the Far East and increasingly reduce the possibility at home. I am not a chauvinist or racist, but I think we should firstly work and take care of ourselves and then enlarge in global market….
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.
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.
Perhaps China is planning to increase their Navy and will change the nature of the ships publicly halfway through the building process.
Well, it was the Commercial Vessels. (non Communist) who delivered the raw materials to China in those heady days now long gone…..
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?