China Shipping expands fleet

Orders made for 5 South Korean vessels, said to be world's largest

China Shipping Container Lines Co, the country's second-largest shipping company by capacity, has ordered what will become the world's biggest container ships from South Korea's Hyundai Heavy Industries Co.

The order, worth $700 million, consists of five container vessels, each with a carrying capacity of 18,400 20-foot containers, the company told China Daily on Monday.

Delivery of the vessels is expected to start in the second half of 2014.

The order will make the Chinese company the second shipping line to own container vessels of such a scale, after the Danish conglomerate AP Moller-Maersk placed an order for 20 such vessels in 2011. Five of those vessels are scheduled for delivery this year.

Market sources said China Shipping had bought its vessels at a "much lower" price than Maersk, as the global shipping downturn has dented shipbuilding prices, but the company declined to comment.

"The order will not put any strain on our finances," it said.

The new vessels will considerably reduce the shipping costs of each container, giving the company a competitive edge in the market, it added.

Hyundai Heavy Industries said the ships will use an engine that can automatically adjust fuel consumption to sailing speed and sea conditions.

This will help improve fuel efficiency, reduce noise and cut emissions, the South Korean shipyard said in a statement.

"We made the order to improve our fleet structure and competitiveness," China Shipping said.

Industry analysts agreed the order will help enhance the Chinese company's strength, but that the container sector as a whole would suffer, as more companies are adding bigger vessels.

"The race for larger container vessels will delay the recovery of the whole industry," said Han Yichao, an analyst with Changjiang Securities Co.

The global shipping industry has experienced rocky times in recent years.

The fragile global economic recovery since the 2008 financial crisis and a debt crisis in Europe have depressed demand.

At the same time, rising oil prices and a glut of vessels have put a drag on the shipping freight industry.

China Shipping narrowed its financial loss to 689 million yuan ($107 million) in the first quarter of this year from 1.45 billion yuan a year ago.

In 2012, the company delivered a profit of 523 million yuan, compared with a loss of 2.74 billion yuan the previous year.

Its shares remained unchanged at HK$1.89 (24 US cents) at the close of trading on Monday in Hong Kong. Hyundai Heavy shares also remained unchanged in Seoul, and have lost 19 percent of their value this year.