COSCO Signs Its Largest Shipbuilding Deal Spending $2B for 42 Bulkers

COSCO is adding $2 billion in orders for new bulkers as it expands its leasing business (COSCO)

Published Sep 2, 2024 1:49 PM by The Maritime Executive

 

 

China COSCO Shipping is continuing its aggressive fleet expansion and modernization signing the largest shipbuilding deal since 2016 when it transformed into a shipping operator and leasing company. The transaction is structured to push forward its position in the global leasing market while expanding its focus on midsize dry bulk carriers.

The transaction in total will build 42 bulkers due for delivery in 2026 and 2027. The deal is being set up through COSCO Shipping Development the group’s leasing and finance company with several divisions involved for the operation of the vessels. The total contract value is being set at approximately $1.8 billion, before tax and a total aggregate value of more than $2 billion. The vessels will operate under long-term charters providing stable future income and cash flow for COSCO Shipping Development.

With the scope of the deal covering 42 vessels, COSCO reports it will be split into two tranches. COSCO will undertake the construction of 20 of the bulk carriers at its group’s COSCO Shipping Heavy Industries. This portion will include two 82,000-ton bulk carriers, 13 vessels each at 80,000 tons, and five 64,000-ton bulk carriers. The value of this portion is set at approximately $820 million excluding tax.

While COSCO traditionally favors keeping the building work within the group, this deal also includes China State Shipbuilding Corporation (CSSC) Chengxi which will be responsible for building 22 ships at a total cost of nearly $1 billion excluding tax. CSSC will be responsible for 22 vessels each at 80,000 tons.

The bulkers are the second step in a major shipbuilding investment. Last week, COSCO reported it had ordered a dozen methanol dual-fuel containerships with advanced technologies. These ships will cost $2.15 billion for delivery between 2027 and 2029. With a capacity of 13,800 TEU, they will be used to expand the company’s Latin American service. They followed an order two years ago for a dozen 24,000 TEU methanol-fueled containerships for COSCO and OOCL. 

In the last week, COSCO has added 54 vessels to its orderbook. The value of the two contracts plus the 2022 deal for the ultra-large containerships means COSCO has commitments for more than $6.85 billion in new shipbuilding in this decade.

The new orders come as the company reported a solid first half of 2024. Total revenues were $1.65 billion with an operating profit attributable to shareholders of $126 million. The leasing business they reported generated over $165 million in revenues as they seek to expand this portion of COSCO’s operations. In addition to ship operations and shipbuilding, COSCO’s related business also includes container manufacturing and leasing. COSCO highlighted the strength of the container manufacturing business reporting a 300 percent increase in sales to over 744,000 TEUs ordered.