COSCO Shipping Lines (COSCON) is switching period charter contracts for 74 container ships in its fleet to bareboat charters.
The ships, comprising 49 vessels of below 9,000TEU and 25 vessels ranging from Neo-Panamaxes to ultra-large container ships, were originally operated by China Shipping Container Lines (CSCL) before the China Shipping and COSCO groups merged in 2015.
Under the terms of the merger, CSCL was renamed COSCO Shipping Development (CSD) as this company switched from being a liner operator to a tonnage provider. This resulted in CSD time-chartering the vessels to COSCON for an agreed five years, at a total cost of around US$5 billion, from December 2015, around the time the Chinese government approved the merger. A similar leasing arrangement was agreed for COSCON to take over CSCL’s containers.
The charter hire is due to expire imminently, and COSCON’s parent, COSCO Shipping Holdings (CSH), has decided to renew the hire on bareboat terms.
The vessels, carrying a total of 581,603TEU, have an average age of around 12 years and the bareboat charters for each ship will last until the vessel turns 25 years. CSH estimates that the cumulative bareboat lease payments will total US$4,618,343,445 and explained that this will reduce charter costs, adding that Drewry Maritime Services was consulted for the transaction.
Including its subsidiaries OOCL and Shanghai Pan Asia Shipping, COSCON is the third largest container liner operator, with 3.03 million TEU capacity, comprising 173 owned ships and 331 chartered vessels.