The China State Shipbuilding Corporation (CSSC) has made history by signing the biggest shipbuilding contract ever in China. They secured an order for 87 vessels valued at about RMB 50 billion (USD 7.1 billion) from China COSCO Shipping Corporation.
This agreement, finalized in Shanghai on Monday, is a significant achievement for both companies and reflects China's growing role in the global shipbuilding sector.
The contract includes a variety of ships, such as ultra-large container ships, very large bulk carriers, VLCCs (very large crude carriers), grain carriers, multi-purpose heavy-lift vessels, MR tankers, Ro-Pax vessels, and small container ships. The construction will take place across six CSSC shipyards: Jiangnan Shipyard, Dalian Shipbuilding Industry, Wuchang Shipbuilding Industry Group, Guangzhou Shipyard International, CSSC Chengxi Shipyard, and CSSC Qingdao Beihai Shipbuilding.
An interesting part of this agreement is its financial arrangement. Around RMB 47 billion of the contract amount will be paid through cross-border transactions in Chinese yuan, which sets a record for the maritime industry. CSSC stated that "This move provides a new model for diversifying settlement currencies in CSSC Holdings' trade."
As the largest ocean transportation service provider in China, China COSCO Shipping Corporation operates a comprehensive industrial chain. This includes container shipping, dry bulk shipping, oil and gas transport, specialized vessels, and passenger shipping. Their listed subsidiaries encompass COSCO Shipping Energy Transportation, focusing on energy transport, and COSCO Shipping Holdings, which specializes in container shipping.
Despite the scale of this contract, CSSC Holdings advised investors to be aware of possible challenges during execution. They mentioned that "due to the long execution period and inclusion of intention orders, revenue will be recognized according to accounting standards." While this cooperation is not likely to have a big effect on current profits, if things go well with the project, it may positively influence the company's future revenue and profits, boosting its competitiveness in the medium to long term.
The announcement also included clear risk warnings, stating that "because of the long execution period and some intention orders, changes in the shipping and shipbuilding market could cause delays or alterations in execution." CSSC pointed out that "this cooperation does not guarantee performance" and advised investors to "be cautious about investment risks."
This deal strengthens China's position in the global shipbuilding industry at a time when there is a growing demand for greener and more advanced vessels. As countries aim to rebuild their shipbuilding capabilities, this landmark agreement highlights China's ambitions in the maritime industrial sector.