Jinhui cancels two newbuildings

Norwegian-listed bulk shipping group Jinhui Shipping and Transportation cancelled major orders for two ships, blaming the market volatility in global financial markets for its decision. The two 300,000 DWT very large ore carriers (VLOC) had been ordered from China Shipbuilding & Offshore International Company at a cost of $122.62 million each.

“Since the subprime mortgage financial crisis has unfolded during the past few months, financial institutions have reduced their willingness to loan funds to other financial institutions and to corporations in general, resulting in a global credit crunch,” Jinhui said in a statement. Despite holding talks with a number of banks with regards to the financing of the two VLOCs, it said the “proposed terms and conditions from banks were found to be much less flexible than those previously enjoyed by the company.”

Jinhui added that the pressures were coupled with a significant increase in the cost of borrowing, even when a 15 year time charter contract with a first class Chinese steel mill was in place. “The risk-return profile of completing the first contract and the second contract has thus changed drastically due to persistent negative sentiment clouding the global financial markets,” the company said.

Jinhui said it would have to pay $2 million each to terminate the two contracts.