China Ship Fund starts operations

China Ship Fund, the first investment fund for the Chinese shipping industry, began operations in Tianjin mainly to support an industry caught in the middle of the economic slowdown. It was one of the ten approved industry funds by the National Development and Reform Committee.

As per report, the fund is expected to be valued at CNY 20 billion ($2.9 billion) and will be used to purchase ships and lease them to domestic carriers. With demand for domestic and international transport of oil and gas in China expected to continue to rise, the fund targets investment in large-scale, specialized ships used to transport LNG, LPG and also semi-submersible vessels. The fund also plans to purchase similar ships from other countries to alleviate the deficiency.

According to Li Kejun chairman and president of China Classification Society a leading domestic ship classification and inspection services provider, investment in these specialized ships is highly profitable. He added that the timing is very good to kick off this type of fund, considering ship prices are at a very low level, despite low investor confidence in the industry compared with one or two years ago.

Zhang Guangqin, head of the China Association of the National Shipbuilding Industry, said that the sector has hit bottom and it is time to invest, but that CNY 20 billion is far too little to spur growth and integration across the industry.

Data from the association showed that in the first nine months of last year, new orders received by China’s shipbuilding yards were 16.9 million DWT, a massive 70% drop from 57.2 million tonnes in the same period last year. From October 2008 to October 2009, orders for 185 ships, 6.77 million DWT in China, were cancelled.