Saturday, July 14, 2012

Chinese Ghost Fleet


We will pause our current round of posts for the weekend. 

I have had numerous reports of ghost towns: Chinese, JapaneseUnited States, Mexico, and others . But this is the first time what has been described as a "ghost fleet" has been spotted.

A mysterious fleet of vessels has appeared out of the fog of the Chinese Sea. Previously these old, local shippers were not seen outside of their coastal waters as they tended to do a lot of short haul work.

It is as if a local moving van company, or the delivery truck for you lumber yard company was all the sudden showing up at truck stops half-way across country hauling dry goods.

Hit at home, China's ghost fleet sails high seas
Jacqueline Cowhig, Reuters, 5 July 2012 (hat tip: Macrobusiness via NC)

China's huge fleet of coastal ships, usually confined to plying the Chinese seaboard, has sailed out of the shadows to seek international business in yet another sign that China's economy is slowing.
The fleet, previously unnoticed by the global market, is suffering from a slowdown in China's coastal trade amid weaker domestic demand from utilities and steel mills and a growing glut in Chinese coal and iron ore stockpiles.
The vessels are now being forced to seek new business such as in the Indonesian coal trade, dealing a further blow to the depressed global dry bulk shipping market.
"There are many more ships lying idle at Chinese ports now - the environment for making money is not so good," said a source at one of the big five coastal shippers, who asked not to be identified.
The slowdown of the Chinese economy has been among the main worries for global markets in general and commodities markets in particular...
The troubles on the Chinese shores have pushed its coastal fleet further afield in a development that has generated more pain for the already depressed shipping industry.
"We've seen these Chinese vessels in the market, attacking the Indonesian coal business and undercutting everybody," said an Asia-based shipbroker with RS Platou.
The Chinese involvement in Indonesis, the world's biggest thermal coal exporter, happened at the worst possible time as rival shipping companies were betting on coal to help replace the lost nickel ore volumes from Indonesia.
The total number of vessels involved in China's coastal trade is estimated at 1,500-2,000 with deadweight ranging between 10,000 and 50,000 metric tons. Many of the 20,000-tonnes or smaller ships are unregistered and unclassified anywhere.
"These smaller ships don't get released into the spot market, they're often very old and only fit to hug the coast," said one shipping source.
Two-thirds of the fleet are up to 20 years old but it is the remaining third which worries industry players as they are newer, bigger and more fuel-efficient vessels.
Those Supramax and Handymax vessels with deadweight of 50,000-60,000 and 40,000-50,000 metric tons are mainly owned by large Chinese firms such as China Shipping CNSHI.UL, COSCO COSCO.UL, Fujian Guohang Ocean Group, DeQin Group Corporation and Sinotrans Ltd.

"It's not a tiny ghost fleet. They can have a massive impact on the international freight market," said a senior shipping source.

A commentor at the post had this to say:

I hope they get a taste of their own medicine!!!! Even the best ships with the best maintenance and the best crew get detained in China for stupid reasons if they are foreign owned or foreign flagged, costing hundreds of thousands, if not millions in damages per every case. Meanwhile, their own rust buckets under Chinese flag and Zulu Charlie registry get away with SHOCKING deficiencies without even a warning. Am sick and tired of the authorities holding a foreign vessel for a king’s ransom, and not being able to take them to any international court as they claim ‘Chinese waters, Chinese Law’. Hope these dregs of the Sea are detained at the first foreign port they trade, and never allowed to leave as they present a SERIOUS threat to not only the environment and people working on board, but to the Global Shipping Community as well.

Sounds like a rather personal dispute.

Ghost Ship:  This is actually a Japanese one set adrift by the Tsunami (from here)


PioneerPreppy said...

An interesting observation almost like looking at the baltic dry business to gauge economic health int he West. It makes sense too since with reduced economic activity in China they would need to expand their areas of operation to stay "afloat" pun intended.

russell1200 said...

PP: China cheats even worse than we do on its numbers, so there are all sorts of shadow indicators that people look at.

Anonymous said...

I don't see China nor India becoming the next superpower. Too much corruption.

Maybe if Russia had a growing population along with their natural resources.


russell1200 said...

GK: In China's favor is that they are not any more corrupt than the United States was in the 1890s. But I agree, they will have a difficult time, and that they are surrounded by reasonably powerful neighbors who either deeply distrust, or hate them, is not helpful. They can play around in Angola all they want, but they still have India on one side of them and Japan on the other.