The Worrying Rise of the Chinese

Genoa -In ten years the Chinese merchant fleet has tripled. “It is a political choice, and the shipping world is afraid.”

di Alberto Ghiara

Genoa - In ten years, from 2004 to 2014, the merchant fleet owned or operated by Chinese shipowners has tripled. Its percentage of total global tonnage has risen during the same period from 6% to 10%, according to data from London based Clarkson Research. What worries operators in the shipping sector is that this growth trend is more of a response to political demands than a response to market demand. In the last decade, the years that saw the greatest growth were 2009 and 2010, which recorded two consecutive 25% increases in the total Chinese tonnage. In short, the fleet grew most just when the crisis was biting the hardest and traffic was decreasing. Before 2008, international commerce grew at an annual rate of 7%, while last autumn the WTO (the World Trade Organization) announced rates of growth for 2014 and 2015 at 3.1% and 4%, respectively. The Genoese broker Ennio Palmesino, who is a specialist in liquid bulk, explained, “In the golden years between 2004 and 2008, China had increased the capacity of its shipyards in a frightful manner, more than all of the rest of the world. With the crisis China had to face the risk of serious industrial unemployment. Many shipyards failed, others that were being designed were never built.

To find work for the surviving shipyards, the government in Beijing had many ships built.” Palmesino cited two examples of how the Chinese intervention in its own fleet, which was really aimed at safeguarding national pride and protecting the internal market, caused difficulties for private international operators. The broker explained, “One year ago, rumours circulated that China had acquired one hundred very large oil tankers, VLCC type, of 250,000 tonnes, so that it could handle its own oil supplies. This news made the market skittish because it would mean failure for many operators. Then the matter decreased in size, as it were, and we had the impression that we were dealing with an authoritarian regime’s posturing.” Beijing’s attitude in relation to foreign projects was exactly the opposite, as the long story of the Brazilian mining company Vale proves. Palmesino recalled, “The Brazilians had planned to create a fleet of large bulk carriers, the so-called “Valemax” ships, to stand up to global competition in ore going to China from Australia, which had lower transportation costs. But these ships were forbidden to enter into Chinese ports for years, so that Vale had to create transhipment ports to transport the ore to its destination with smaller ships.

China ruined that plan. Now the ban has been removed, but these episodes show that China’s decisions are dictated by a nationalistic vision.” For the moment, Beijing continues its rise in the rankings of the global fleet and today China’s fleet is in the third place after Greece and Japan. In 2004, China added ships with a capacity of over 100 tonnes for a total fleet gross tonnage of 37.7 million tonnes. In 2014 these figures increased by 216% to 119.2 million tonnes. The greatest growth was in bulk carriers, whose capacity almost quadrupled, reaching 69.2 million tonnes of gross tonnage. Carriage charges for the maritime transport of bulk cargo are at their lowest for the last 26 years. There are shipowners like the Scorpio group, led by Italian Emanuele Lauro, who decided to convert the function of some bulk carriers that are still under construction into hydrocarbon transport. China’s financial intervention in favour of shipping has considerable influence on the financial model for European and American shipping, which after the crisis of 2008 was able to rely less and less on the help from the banks and has had to depend more and more on investment funds and the markets.