① China Heavy Industries has acquired 6+2 new convention-fuel VLCCs and 4+2 LNG dual-fuel VLCCs, with a total contract amount of nearly US$1.8 billion; ② The industry says that even if new conventional fuel vessels are built, shipowners can achieve greening by installing desulfurization towers and carbon capture devices.
CIFA, Feb. 6 (Reporter Hu Haoqiong) Oil tanker orders continue to increase, and China Heavy Industries (601989.SH) has taken another big order. An industry insider told the Finance Association reporter that judging from shipowners' costs, it is currently not cheap to install conventional fuel vessels, but since the industry is still confused about zero-carbon solutions, it makes sense for shipowners to order conventional fuel vessels.
Today, China Heavy Industries announced the signing of a major contract with its wholly-owned subsidiary Dalian Shipbuilding. According to the announcement, Dalian Shipbuilding has each signed a number of new very large tanker (VLCC) shipbuilding contracts with two well-known European shipowners, including 6+2 convention-fuel VLCCs and 4+2 LNG dual-fuel powered VLCCs. The total contract amount is close to 1.8 billion US dollars.
China Heavy Industries stated in the announcement that the new VLCC construction contracts for the above 10 VLCCs came into effect when they were signed, and the other 4 VLCCs were optional contracts. The contract was paid in US dollars, and the total contract amount accounted for about 29% of the company's 2022 audited revenue (calculated at the exchange rate of February 6, 2024). However, delivery of the VLCC contract mentioned above began at the end of 2026, and the contract execution period is long. It is expected that it will not have a significant impact on the company's profit in 2024. The signing of the contract will have a certain positive impact on the company's operating income and profit for the next year, which is conducive to improving the company's core competitiveness and profitability.
From an industry perspective, according to the latest data from the China Shipbuilding Industry Association, tanker orders grew the most in 2023. In terms of CGT, the year-on-year change in the tanker transaction structure reached 244.8% in 2023.
China Heavy Industries also explained in the announcement that VLCC is the main ship type built by Dalian Shipbuilding. Up to now, Dalian Shipbuilding has delivered a total of 117 VLCCs to domestic and foreign shipowners, ranking first in the number delivered by domestic shipyards.
It is worth noting that the new order received by Dalian Shipbuilding includes 6+2 conventional-fueled VLCCs. The aforementioned industry insider told the Financial Federation reporter that even if they currently choose conventional fuel, shipowners can achieve greening by installing desulfurization towers and carbon capture devices.
According to the Financial Services Association reporter, at present, shipowners have not reached an agreement on alternative fuels to achieve decarbonization goals.
Judging from the latest data from the China Shipbuilding Industry Association, in 2023, the share of orders for ships using alternative fuels was 34.4% (in terms of capacity) and 27.1% (in terms of number of ships), which is a certain decrease from 2022. LNG power is still the main force in new ship orders, and the share of orders using methanol power has increased markedly. At the same time, there has been a significant increase in new orders using the Ready power reserve (Ready) technology. Among the ships under construction, 251 chose methanol Ready, while 252 chose Ammonia Ready. In addition, there has been a marked increase in the number of ships using new energy-saving technologies such as air lubrication, wind sails, and heat recovery management. About 25% of new ship orders in 2023 use one or more of the above energy-saving technologies.