Shanghai Dingheng Shipping, a chemical tanker operator in China, has commenced an ambitious expansion plan to build a fleet of 100 chemical tankers with an IPO also on the cards.
According to Li Duozhu, president of Dingheng Shipping, the new chemical tankers the company plans to build are mainly medium and small tankers with capacity ranging from 2,000 dwt to 15,000 dwt.
Dingheng will use the vessels to expand its own fleet and also sell and charter to other owners and investors globally.
“It will be a brand new business model in the international petrochemical logistics market,” Li says.
Currently the company is in talks with a consortium led by Tunku Ismail, the crown prince of Johor in Malaysia, on plans to establish joint ventures to meet the potential demands from the petrochemical development plans of Malaysia.
Li says part of the rationale for the giant expansion plan now is down to the very competitive prices offered by domestic private yards.
“We have formed close collaborations with shipyards, equipment providers and material providers to take good use of their extra capacity and inventory, which have lowered the ship price substantially and also lowered the financing cost in the deals,” Li says.
In October last year, Dingheng ordered a total of 16 chemical tankers at Ningbo Xinle Shipbuilding and has since been negotiating for an additional 10 tankers.
“Comparing with large size chemical tankers, the supply/demand in medium and small is more balanced and the profit ratio is relatively stable,” Li claims.
Dingheng was once on the verge of bankruptcy in 2010 when the company was hit by a financial crisis with huge liabilities and also in the same year, one of the company’s vessels was kidnapped by Somali pirates. The company paid a huge amount of ransom despite the financial difficulties and managed to get all 19 Chinese crew back.
The magnanimous act by Dingheng helped the company win the support from government, banks and business partners who together helped it get through the difficult times at the start of the decade.
Currently Dingheng operates a chemical tanker fleet of over 20 vessels with total capacity of 120,000 dwt. The company plans to add another 40 vessels in the next four years.
“Our goal is to become into the top 10 in the chemical tanker sector in the world,” Li says, adding that an IPO plan is also well on track.
What is the point of building another 100 ships when the chemical tanker industry has been suffering for years from over capacity – namely more ships built than actual need generated from cargo demand??? If Ding Heng succeeds, they will simoly perpetuate more misery in the chemical tanker business with little or no change of making any money themselves or generating any value, except perhaps for future distressed asset investors. Is that a worthy goal?
What is new or original about this plan for 100 ships? The Japanese tried a similar scheme back in the 1980’s with Kurushima yard and went bankrupt. BLT was touted several years ago as a new Far East powerhouse in chemical tankers only to end in another spectacular bankruptcy.
There are plenty of existing players. Odfjell has a goal of 100 ships, but they are already a major player with an integrated operation and major cargo book.