German liner giant Hapag-Lloyd is said to have resumed negotiations with Chinese shipyards for six 16,000TEU liquefied natural gas (LNG) dual-fuel container ships. In February this year, multiple sources said that Hapag-Lloyd had signed a letter of intent with Hanwha Ocean for the same order.
Hapag-Lloyd has entered into negotiations with China’s largest private shipbuilder, Yangzijiang Shipbuilding Group, for six 16,800 TEU LNG dual-fuel container ships, which are an option for a series of 12 ships of the same type that the two parties have contracted for 2024, according to Trade Winds.
Earlier this year, due to the U.S. restrictions on China’s shipbuilding industry, Hapag-Lloyd planned to turn to South Korean yards to place orders for the six large dual-fuel container ships mentioned above, and signed a letter of intent with Hanwha Ocean to build them worth about $1.2 billion, with the cost of a single ship at around $200 million.
The industry pointed out that Hapag-Lloyd shipbuilding strategy change from the U.S. port fee policy “forced concessions” and the South Korean shipyard offer rise.
In April this year, the Office of the United States Trade Representative (USTR) announced specific restrictions and charging measures after a 301 investigation into “China’s dominant position in the maritime, logistics and shipbuilding industries.” Compared with the proposed proposal in February this year, the version announced in April increased pressure on Chinese shipowners and operators, but reduced charges for foreign shipowners with Chinese-built ships and provided a variety of exemptions. The relatively relaxed restrictions on foreign shipowners are one of the positive factors driving their return to Chinese shipyards.
In addition, China’s offer for a 16,000TEU LNG dual-fuel container ship is about $190 million, while the offer for a similar ship from a Korean shipyard is about $225 million, a difference of $35 million. Taking Hapag-Lloyd’s order as an example, the total cost of the six new ships will be $210 million (about RMB 1.5 billion) higher. This price gap, coupled with the partial release of the US port fee policy, prompted Hapag-Lloyd to reconsider placing orders with Chinese shipyards.
At the end of last year, Hapag-Lloyd has ordered 12 16,800 TEU LNG dual-fuel container ships from Yangzijiang Shipbuilding, with a single-ship cost of about $210 million, and even if it continues to negotiate with the ship’s owner at that cost, it will still be lower than the South Korean shipbuilder’s offer of $225 million each, and have a more competitive advantage.
It is worth noting that Hapag-Lloyd and Hanwha Ocean’s letter of intent was originally planned to make a decision in late March this year, but after the signing of the letter of intent has not been a new order dynamics, meaning that the Chinese shipyards “to get back” the possibility of this large single of the dual-fuel container ships.