China COSCO Orders Ultra-Large Containerships for $1.5 Billion to Cut Costs

By Joshua Fellman

(Bloomberg) — China COSCO Holdings Co., one of many nation’s largest delivery corporations, agreed to have 11 new container vessels constructed for $1.51 billion, because it seeks to chop prices.

Six boats will likely be constructed by shipyards managed by father or mother China Ocean Shipping Group Co., based on a Hong Kong inventory alternate submitting Wednesday. The stability will likely be constructed by models of China Shipbuilding Industry Corp. and China State Shipbuilding Corp. The ships will every have capability of 19,000 normal 20- foot containers, or TEUs.

“Its all about liners trying to remain competitive by lowering their slot costs, which is the average cost to ship a container,” Lee Klaskow, a Bloomberg Intelligence senior analyst who follows freight transportation and logistics, mentioned in an e-mail. “This has been mostly done by increasing the number of containers a vessel can hold. They are just following the lead of Maersk, which has had success with this strategy.”

Container delivery corporations globally could also be fortunate to interrupt even this yr due to overcapacity and aggressive pricing, Drewry Shipping Consultants Ltd. mentioned in July. That was a revision from an earlier estimate that the trade would document as a lot as $8 billion in revenue for 2015.

China COSCO mentioned the brand new vessels, to be delivered in 2018, will “improve the shipping capacity of the fleets of container vessels of the company and upgrade the fleets,” based on the assertion.

The shares of most of China’s publicly traded delivery corporations, together with China COSCO, are suspended from buying and selling in Hong Kong and Shanghai pending bulletins of transactions. The corporations haven’t but printed particulars.