Chinese shipping firms buy boats as market recovery fuels optimism

HANGZHOU - A recovery in the shipping market has buoyed optimism among Chinese shipping companies, with many once again buying new boats to expand their fleets.

Zhongchang Marine Co., Ltd. in East China's Zhejiang province was among those betting on better days to come. Its president, Huang Shenghui, said he has finally seen a glimpse of hope after years in trouble as an industry downturn persisted in the wake of the global financial crisis 10 years ago.

Zhongchang Marine recently bought seven bulk cargo ships through a financial leasing program to increase its fleet to 17 ships, raising its transport capacity from 430,000 tonnes to 780,000 tonnes.

Financial leasing can help ease operating pressure and reduce financial costs, said Huang. In 2017, its revenues from the shipping business rose 70 percent year on year to 380 million yuan ($60 million), with the net profits exceeding 100 million yuan.

"Following the financial crisis in 2008, the shipping market entered a long period of downturn and as a result, many loss-making firms went bankrupt,"said Huang.

In the second half of 2016, the chill started to recede, and in 2017, shipping rates saw a rare bull market with continuous rises, ending a seven-year downturn.

Yao Jian, an analyst with China Securities, said that with a recovery in global trade in 2017, when China's trade value rose 14.2 percent, the Baltic Dry Index, a shipping index measuring change in the transportation cost of raw materials, has risen above 1,200 points from around 950 points at the beginning of last year.

To cash in on the increase in shipping rates, Zhejiang Xinyihai Shipping Co., Ltd. bought six ships with a total transport capacity of 95,000 tonnes.

"The year 2017 was when China's shipping industry recovered from the trough," said Tang Tianyu, an official with the Zhoushan Port and Shipping Management Bureau in Zhejiang.

Some local shipping firms once again bought new cargo vessels, driving the total transport capacity in Zhoushan to exceed 6 million tonnes for the first time, said Tang, adding that fewer ships are now idle.

The shipping industry in Zhoushan posted revenue growth of over 10 percent last year, with two-thirds of general cargo shipping firms reversing from losses to profits.

China's economic recovery has boosted demand, which has helped the coastal shipping market record strong performance, said Tang.

China's strong demand for coal is a major driver behind the rising shipping rates, said Tang, adding that coal contributed 1 billion tonnes in domestic and foreign trade last year.

"The rapid market recovery has exceeded expectations," said Huang. "Many of the once pessimistic ship owners have changed their expectations and restored some confidence," he said.

"Many shipping firms could only recruit a few college graduates last year," said Huang, adding that the difficulty in recruitment showed the harsh situation facing China's shipping industry, which is still plagued with excess capacity.

The shipping companies are still cautious about expanding their fleets due to rising prices of cargo ships, difficulty in fundraising and divided market expectations.

"After a long chilly winter, the shipping market has finally seen the arrival of spring and some of the confidence has been restored," said Huang. "But we should be more rational about capacity increases, and we'd like to see a stabler market."