COSCO transferring bulk ships to Hong Kong arm
China will take advantage of the strong demand for dry bulk ships by having a Hong Kong arm buy 412 dry bulk vessels from affiliates.
China has become the dominant user of dry bulk ships for imports of iron ore, coal and other commodities to feed its manufacturers and infrastructure construction. Strong Chinese imports have driven up both freight rates and the values of dry bulk vessels.
Under the plan, China COSCO Holdings Co. Ltd., an arm listed on the Hong Kong Stock Exchange, will pay 34.6 billion yuan (about $4.6 billion) for 100 percent equity in COSCO Bulk Carrier Co. Ltd, Qingdao Ocean Shipping Co. Ltd, Golden View Investment Ltd., and Shenzhen Ocean Shipping Co. Ltd.
The companies control a fleet of 412 ships, including 202 of which are owned. Those ships have aggregate capacity of 32 million deadweight tons, about 8.4 percent of the world’s total dry bulk fleet.
Philip Damas, a researcher with Drewry Shipping Consultants, said the state companies appear to be selling the assets to the Hong Kong arm at a moderate price. That should make shares of the Hong Kong company attractive to investors who will bid its share prices up and make it attractive for the firm to raise capital by selling shares, he explained.
The company said it plans to raise funds for the ship purchases through a private placement, possibly supplemented by internal funds and loans from financial institutions.
Basil Karatzas, a broker at Compass Maritime in Ft. Lee, N.J., said that the Chinese have been extremely active buyers of older, second-hand dry bulk tonnage in recent years.
“In general they are buying so much material that it makes sense for them to control the tonnage and freight. It is a logical expansion of their activity,” Karatzas said.
COSCO transferring bulk ships to Hong Kong arm
