China COSCO Holdings Co., one of the nation’s biggest shipping companies, agreed to have 11 new container vessels built for $1.51 billion, as it seeks to cut costs.
Six boats will be built by shipyards controlled by parent China Ocean Shipping Group Co., according to a Hong Kong stock exchange filing Wednesday. The balance will be built by units of China Shipbuilding Industry Corp. and China State Shipbuilding Corp. The ships will each have capacity of 19,000 standard 20-foot containers, or TEUs.
“Its all about liners trying to remain competitive by lowering their slot costs, which is the average cost to ship a container,” Lee Klaskow, a Bloomberg Intelligence senior analyst who follows freight transportation and logistics, said in an e-mail. “This has been mostly done by increasing the number of containers a vessel can hold. They are just following the lead of Maersk, which has had success with this strategy.”
Container shipping companies globally may be lucky to break even this year because of overcapacity and aggressive pricing, Drewry Shipping Consultants Ltd. said in July. That was a revision from an earlier estimate that the industry would record as much as $8 billion in profit for 2015.
China COSCO said the new vessels, to be delivered in 2018, will “improve the shipping capacity of the fleets of container vessels of the company and upgrade the fleets,” according to the statement.
The shares of most of China’s publicly traded shipping companies, including China COSCO, are suspended from trading in Hong Kong and Shanghai pending announcements of transactions. The companies haven’t yet published details.