China COSCO Shipping signed a contract to build 42 bulk carriers

China COSCO Shipping continues its aggressive expansion and modernization of its fleet by signing the largest ship construction agreement since 2016. At that time, the company became a shipping operator and a leasing company. The purpose of this transaction is to strengthen COSCO’s position in the global leasing market, with a focus on medium-sized bulk cargo carriers.

COSCO Shipping signs a $2 billion contract to build 42 bulk carriers that will strengthen the fleet by 2027.

The agreement includes the construction of 42 bulk carriers to be delivered from 2026 to 2027. The transaction is carried out through COSCO Shipping Development, a leasing company and a financial group that engages in ship operation through its numerous branches.

The contract value was set at approximately $1.8 billion before tax, and the total value of the transaction exceeds $2 billion. Ships will be operated on the basis of long-term charter agreements, which will provide COSCO Shipping Development with stable revenue and cash flow in the future.

COSCO informs that the construction of 42 vessels will be divided into two tranches. The COSCO Shipping Heavy Industries Group will build 20 bulk carriers. This part of the agreement will build two bulk carriers with a load capacity of 82,000 tonnes, 13 ships with a load capacity of 80,000 tonnes each and five mass carriers with a load capacity of 64,000 tonnes. The value of this tranche is about $820 million tax-free.

COSCO develops a fleet of container ships and bulk carriers, investing over US$6.85 billion in new units by 2029

Although COSCO usually prefers to carry out construction work inside its own group, the agreement also includes cooperation with China State Shipbuilding Corporation (CSSC) Chengxi. The CSSC will be responsible for the construction of 22 ships with a load capacity of 80,000 tons each, which is a cost of nearly $1 billion without tax.

Construction of bulk carriers is the second stage of the large COSCO shipbuilding investment. Last week the company announced the order of twelve container ships powered by double methanol fuel, equipped with advanced technologies. These ships will cost $2.15 billion and will be delivered from 2027 to 2029. With a capacity of 13 800 TEU, they will serve to expand the company's services in Latin America. This order was a follow-up to an earlier decision two years ago when COSCO ordered a dozen containers with a capacity of 24,000 TEU powered by methanol for itself and OOCL.

Last week COSCO increased its order portfolio by 54 ships. The value of these two new contracts, combined with the agreement of 2022 on very large container ships, means that COSCO has allocated over US$6.85 billion to the construction of new units in this decade.

New orders are included in the solid financial results of COSCO for 2024

New orders appeared at the moment when the company recorded solid results for the first half of 2024. Total revenue amounted to US$1.65 billion and operating profit for shareholders amounted to US$ 126 million. COSCO Shipping Development generated over $165 million in revenue, focusing on developing its leasing business.

In addition to shipbuilding and shipbuilding, COSCO also operates container production and offers leasing. The company emphasized the strength of its container production segment, noting a 300-percent increase in sales to over 744,000 TEU ordered.

Source: COSCO Shipping/MD