Three shipyards to build 20 vessels! COSCO SHIPPING Special accelerates the expansion of its pulp ship fleet

In addition to car carriers, pulp carriers are also a key business in COSCO SHIPPING Special Transport's 14th Five-Year Plan. During the 14th Five-Year Plan period, COSCO SHIPPING Special Transport strategically focuses on "three cores and three chains," one of which is the core pulp business and the pulp logistics industry chain. In 2022, COSCO SHIPPING Special Transport's self-owned and chartered pulp carrier fleet achieved RMB 1.902 billion in operating revenue, an increase of 80.37% year-on-year, accounting for 16.65% of the company's fleet operating revenue; operating profit reached RMB 131 million, an increase of RMB 46 million year-on-year.

As of the end of 2022, COSCO SHIPPING Special Transport's pulp carrier fleet reached 18 vessels with a total deadweight of 1.113 million tons, establishing good cooperative relationships with major global pulp manufacturers. The company has established good cooperative relationships with major global pulp manufacturers, and last year signed and renewed long-term pulp sea freight contracts with multiple pulp customers, continuously enriching its pulp industry chain operating cargo reserves; successfully developed the dissolving pulp business, continuously enriching the types of pulp cargo; based on sea transportation, it focuses on building a sea-land coordinated pulp transportation industry chain system, and jointly established Shanghai Yuanzhixin Supply Chain Management Co., Ltd. to accelerate node layout, speed up pulp logistics, and continuously improve competitiveness.

In 2023, COSCO SHIPPING Special Transport will have 2-7 newly built multipurpose pulp carriers delivered and put into operation, adding 124,000-464,000 tons of new capacity, which will accelerate the expansion of the scale and market share of the multipurpose pulp carrier fleet.

COSCO SHIPPING Special Transport predicts that with the acceleration of global economic recovery, the volume of pulp shipments will maintain steady growth in 2023. In 2023, China's paper companies will have a lot of new production capacity, which will provide strong support for domestic pulp import demand. Given the slow growth rate of global pulp shipping capacity and the still very small proportion of pulp carrier backlog orders, market supply and demand will remain basically balanced, and the pulp transportation market is expected to steadily rise. With the macro-economy continuing to maintain positive growth and consumption continuing to recover, the supply-demand gap for pulp in China will continue to widen, and the demand for pulp imports will remain positive in the long term.

On March 30, COSCO SHIPPING Special Transport disclosed that it plans to raise approximately RMB 1.8 billion through a private placement to be used for leasing 29 multipurpose pulp carriers. COSCO SHIPPING Special Transport stated that in order to optimize its vessel structure, improve its operational management efficiency, and further enhance the overall competitiveness of its fleet, the company plans to use part of the funds raised this time to pay for the leasing fees for 29 multipurpose pulp carriers, including 12 62,000-ton multipurpose pulp carriers (total investment of RMB 1.328 billion, planned investment of RMB 740 million), 5 68,000-ton multipurpose pulp carriers (total investment of RMB 611 million, planned investment of RMB 388.5 million), and 12 70,000-ton multipurpose pulp carriers (total investment of RMB 1.01 billion, planned investment of RMB 640 million). The project will be implemented by its wholly-owned subsidiaries COSCO SHIPPING (Hong Kong) Investment Development Co., Ltd. and Yangpu COSCO SHIPPING Special Transport Co., Ltd., which will sign lease agreements with the lessors.

COSCO SHIPPING Special Transport stated that in recent years, the company has obtained multiple long-term COA contracts from global pulp giants, and pulp transportation volume will grow rapidly in the next few years. Based on the calculation of the company's currently held and continuously tracked pulp transportation COA contracts, the company needs to build and lease a batch of 62,000-ton, 68,000-ton, and 70,000-ton multipurpose pulp carriers to meet the transportation needs of the COA contracts. At the same time, the company will balance its capacity structure through various methods such as self-built vessels, long-term charters, and short-term charters to improve asset operating efficiency and operating income, and better respond to market changes and strategic adjustments under different economic and operating environments.

As of December 31, 2022, COSCO SHIPPING Special Transport owned and controlled 18 self-owned pulp carrier capacities, including 10 pulp carriers already included in this fundraising project. Compared with its competitors, the company's current professional pulp carrier capacity is still insufficient. Therefore, the company needs to strive to accelerate the development of its pulp carrier fleet, further optimize its existing ship types, expand the strength and operating scale of its professional pulp carriers, rapidly grow stronger, seize the opportunity of the constantly changing competitive landscape of the pulp transportation market, become a world-class pulp carrier owner, and establish a leading position in the global pulp transportation market.