SINGAPORE (Sept 28): Credit Suisse is maintaining its “hold” call for Yangzijiang Shipbuilding on its potential to win contracts worth more than US$450 million ($613.5 million) for six very large ore carriers (VLOCs) from Vale.
According to Tradewinds, Vale has firmed up long-term contracts for at least 30 very large ore carrier (VLOC) newbuilds with seven shipping companies.
These are 10 units for South Korea's Polaris Shipping, four units for Pan-Ocean, two units each for H-Line Shipping, SK Shipping and Korea Line Corp as well as six units for China's ICBC Financial Leasing and four for Cosco.
The shipping companies are negotiating newbuild contracts with shipyards, including Yangzijiang Shipbuilding, Bohai Shipbuilding and Qingdao Beihai Shipbuilding.
Hyundai Heavy Industries has since won a contract from Polaris Shipping worth US$800 million ($1.1 billion) for 10 325,000dwt VLOCs.
“In our view, Yangzijiang has a decent chance of securing six VLOC contracts from ICBC, due to its track record of constructing VLOCs,” says lead analyst Gerald Wong in a Thursday report.
Yangzijiang has delivered 12 VLOCs, the second highest among bidding Chinese yards after Shanghai Waigaoqiao.
Only three of the bidding Chinese yards have 400,000dwt bulk carriers in their orderbook, including Yangzijiang, Beihai Shipbuilding and Shanghai Waigaoqiao.
It is worth noting that all six 400,000dwt VLOCs in Yangzijiang's orderbook were contracts placed by ICBC in 2016.
“We believe the potential Vale newbuilds support our view of a moderate shipbuilding upcycle, with the current orderbook/fleet ratio of global shipbuilding fleet at below 10%,” says Wong.
Meanwhile, the analyst also notes that CEO Ren Letian bought 2 million shares at $1.50 post the placement on Aug 31, and another 100,000 shares at an average price of $1.395 on Sept 25.
Shares in Yangzijiang are trading 0.5 cent higher at $1.41, given the stock a market cap of $5.6 billion.
