The global VLCC newbuilding market continues to heat up, and Hudong-Zhonghua has made its debut in the VLCC market, securing the largest order of the year. According to TradeWinds, Dynacom Tankers Management, a Greek-owned oil tanker subsidiary of George Procopiou, has reached an agreement with Hudong-Zhonghua to order up to 12 VLCCs. The new vessels will be delivered in 2028, with each costing over 120 million US dollars, and the total transaction amount will reach 1.44 billion US dollars (approximately 10.014 billion yuan).
For reference, Clarksons' data shows that the current price of a 315,000-320,000 DWT traditional fuel VLCC newbuilding is around 128 million US dollars, the same as last year.
If this order is confirmed, it will be the first time for Hudong-Zhonghua to build VLCCs. As a core enterprise of China State Shipbuilding Corporation, Hudong-Zhonghua has mainly focused on building container ships and LNG carriers in recent years. According to Clarksons' data, Hudong-Zhonghua only built large oil tankers from 2004 to 2011, when the shipyard delivered dozens of Aframax and LR2 product tankers. It is said that Hudong-Zhonghua's orders for LNG carriers and container ships have been continuously increasing, and the company is planning to further expand its VLCC construction business to diversify its customer base and mitigate the risks brought by fluctuations in demand for a single ship type.
Currently, Hudong-Zhonghua has a total of 92 ships on order, totaling 10.84 million DWT and 7.25 million CGT, all of which are LNG carriers (51) and container ships (37), with delivery dates extending to 2031. Sources revealed that Dynacom has reserved the delivery berths at Hudong-Zhonghua for 2028, which is significantly earlier than the mid-2029 delivery window generally available in the industry. The VLCC berths reserved by Dynacom come from Hudong-Zhonghua's planned super-large No. 5 dry dock, which is part of the second phase of its Changxing Shipyard project.
Last year, the new factory of Hudong-Zhonghua - the second phase of the CSSC Changxing Shipyard - was officially put into use. It is understood that the second phase of the CSSC Changxing Shipyard is located along the southern coast of Changxing Island in Shanghai, with a total construction area of 431.8 hectares and a planned total investment of 18 billion yuan. The overall design was undertaken by CSSC No. 9 Design Institute, and the construction was carried out by China Communications Third Navigation Engineering Bureau Co., Ltd. Construction began on January 4, 2021.
The first phase of the second phase project covers an area of 214.6 hectares, with an investment of 8 billion yuan and a planned construction area of 460,000 square meters. The core construction contents include a research and design building, a hull joint workshop, a curved section assembly and welding workshop, an outfitting equipment workshop, No. 1 indoor dry dock, No. 2 outdoor dry dock, a harbor basin, and an outfitting equipment wharf. After the project is completed, the annual capacity for building special ships will reach 6, and the annual capacity for building large LNG carriers will increase from the current 6 to more than 10.
Including Hudong-Zhonghua's 12 orders, Dynacom currently has 29 VLCCs under construction, with some of the vessels scheduled for delivery this year. All these VLCCs are being built by Chinese shipyards, including 2 from Dalian Shipbuilding Industry Co., Ltd. in Dalian, 3 from New Times Shipbuilding Co., Ltd., and 12 from Hengli Heavy Industry Co., Ltd. Just earlier this month, Dynacom placed an additional order for 4 306,000 DWT VLCCs at Hengli Heavy Industry Co., Ltd. The new vessels will be delivered in the second half of 2028. It is known that Greek shipping magnate George Procopiou owns three major shipping companies: Dynacom Tankers Management, Sea Traders and Dynagas. His fleet consists of over 170 vessels, providing dry bulk, crude oil and specialized maritime services. With a wide and good operational record in the global maritime logistics industry, he is the fifth-largest shipowner in Greece. In April 2023, George Procopiou launched a new round of shipbuilding plans, ordering nearly 100 new vessels over the past two years, including oil tankers, bulk carriers and LNG carriers. The majority of these new ship orders were received by Chinese shipyards, with the exception of five 200,000-cubic-meter large LNG carriers ordered from South Korea's HD Hyundai Heavy Industries.
Currently, the VLCC newbuilding market is quite active. Since January this year, the global VLCC newbuilding orders have reached 13, among which Hengli Heavy Industry has received 13, including 4 from Dynacom Tankers, 2 from Seatankers and 2 from EPS. Additionally, Cape Shipping has ordered 1 VLCC from Qingdao Beihai Shipyard, Asyad Shipping has ordered 3 from South Korea's Hanwha Ocean, and Kyoei Tanker has ordered 1 from Japan's JMU. If the 12 VLCCs ordered from Hudong-Zhonghua are included, the number of VLCC newbuilding orders in January will reach "one of the highest levels in a single month in history". The surge in VLCC newbuilding orders is supported by multiple factors. From the supply side, there is a large amount of old capacity in the market, with about 20% of VLCCs over 20 years old. Due to the uncertainty brought about by geopolitical changes, these old ships may be used as floating storage units.
Moreover, the VLCC market has seen a significant recovery in the past year, with daily charter rates for VLCCs rising sharply and the availability of seaworthy vessels in the second-hand market becoming increasingly scarce. Data provided by shipbroker Banchero Costa shows that the price of second-hand VLCCs has continued to rise to a record high, with a 5-year-old VLCC now priced at nearly $120 million, only about 6% lower than the newbuilding price of $128 million as per Clarksons. Driven by both cost-effectiveness and long-term earnings expectations, shipowners are accelerating the locking of newbuilding capacity.