Beijing has ordered state-owned Wuhu Shipyard to stop constructing ships larger than supramax from 2020, delivering a blow to an order by John Koo.
A Wuhu official told TradeWinds that the yard, which is based in the Anhui province city of Wuhu, has been notified by the government that it will not be able to build vessels larger than 55,000 dwt because of the Nanjing Yangtze River Bridge.
“According to the state, this is for the safety of ship navigation and for the bridge,” a Wuhu official said. “Once we finish delivering the five 64,000-dwt bulk carriers that are booked in our orderbook next year, we will discontinue building ultramax ships."
Wuhu claims the notice from the Chinese government has resulted in the shipyard losing an ultramax bulker order worth $240m from Glory Maritime International of Hong Kong.
'Alternative ship type'
The newly formed shipping company, which was founded by Koo, inked a newbuilding contract in September last year for four firm vessels plus six options for deliveries starting at the end of 2019.
Koo confirmed that he has been notified by Wuhu that the ultramax bulker contract will be terminated due to new restrictions imposed by the Chinese government.
“We are in talks with the shipyard on an alternative ship type,” Koo said, without going into details.
One source familiar with Koo said he is in discussions with Wuhu for a series of 49,999-dwt MR product tankers.
Shipbuilding experts said Chinese shipyards located upstream of the Nanjing Yangtze River Bridge have long faced size restrictions because of the river's shallow draught and height limit of the bridge.
“Some shipyards could only launch their newbuildings during months when the river runs high,” one shipbuilding expert said.
“Due to the height limit of the bridge, some yards... have the ship’s radar and accommodation block installed at another shipyard that is located downstream of the bridge because of the height of bridge.
"They also need to employ tugs to help navigate the vessels and this adds up the operating costs for the yards.”
He said a few shipyards, such as Jiangdong Shipbuilding and Wuchang Shipyard, are also facing the tightening restrictions that have impacted Wuhu, but those facilities are already focused on smaller ships.
Wuhu was once one of the shipyards under the umbrella of state-owned China State Shipbuilding Corp. However, it got into financial problems in the early 2000s due to low-priced shipbuilding contracts and the late delivery of vessels.
The shipyard is now under the control of China's state-owned group Chery Holding after the car manufacturer threw a lifeline to Wuhu in 2007.
According to Clarksons’ Shipping Intelligence Network, Wuhu has built bulkers up to kamsarmax in size, delivering 11 such units between 2012 and 2014.