Dalian: Dalian is a place that lives and breathes shipping – as any visitor to the Liaoning coastal city will attest with its myriad shipbuilding cranes and multiple berths. To the north of Dalian, Changxing island is being developed as a major petrochemical and shipbuilding base. Now to add to the maritime mix, the Russian-founded metropolis can boast northeast China’s first shipping fund.
Dalian Port & Shipping Fund (PFS) was established in June last year. The RMB5bn fund focuses on logistics, shipping and port investments. In October, a chemical tanker firm, Dalian Hezhong Shipping, was formed by PFS. Hezhong acquired Shanghai Sanhan Shipping when it was established and will continue Sanhan’s liquid chemical focus.
In Wang Kunxiu, PFS has got the ideal person to navigate shipping investments. Her background includes stints as a senior manager at Shanghai State-owned Assets Management Co and deputy general manager at China Ship Fund Management. She has been involved in a number of major asset restructuring deals, surely something that will continue in the coming years as the shipping downturn continues to bite.
“Hezhong Shipping will play an important role in the relevant chemical logistics chain and support the ongoing development of Dalian as an international shipping centre,” Wang tells Maritime CEO.
PFS has already invested in a number of port and logistics infrastructure projects, and Wang reveals her company is currently studying a big petrochemical terminal project on Changxing island.
With the big exception of state-run Cosco Dalian, the tanker arm of China’s largest maritime conglomerate, the petrochemical shipping industry is “relatively underdeveloped” in Liaoning, claims Wang, hence Hezhong’s establishment to meet “growing demand”.
Compared to bulk shipping, the chemical segment is relatively stable, says Wang, who points out that Hezhong is focused on the high-end of the market which in China is small in quantity and much higher value, thanks in part to its far stricter vessel requirements. This niche segment accounts for less than 10% of the whole chemical shipping capacity in China, Wang says.
“The domestic shipping market is strictly regulated, and the government has very strict rules on approving new chemical shipping capacities due to safety concerns,” says Wang, who observes that new capacity is coming onstream much slower than demand.
“While there is probably overcapacity in low-end chemical shipping, there’s a dearth of high-end chemical shipping capacity in China,” she maintains. “That’s the main reason we invested in Hezhong Shipping.”
Hezhong Shipping aims to build a fleet of 20 chemical tankers through newbuilds and second-hand purchases. The company has already placed an order for four chemical tankers with CSSC-affiliated Chongqing Chuandong Shipbuilding for delivery by 2014. Up to 60% of the financing will come from banks and rest will come from PFS. Hezhong will also charter some vessels.
PFS is also planning an offshore fund, China Ports & Shipping Fund (CPSF), with interests in bulk shipping and the offshore engineering sector.
CPSF is a BVI-exempted limited partnership with first round funding of up to $150m and partnership terms lasting 10 years.
“Although currently the bulk shipping market is at its bottom affected by the sluggish global economy, in the long term, bulk cargoes like iron ore, grain, oil are the milestones of China’s national economy, there is a rigid demand. We see it as a periodic industry, I think it will gain growth slowly in the next five years,” Wang argues. [14/03/13]
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