Over 20 orders! Zhengde Shipping places its first order at a mainland shipyard

Attracted by favorable ship prices and delivery times, Taiwan's well-known shipping company, Franbo Lines, placed its first order with a mainland Chinese shipyard. The company plans to order at least 20 more new vessels, more than doubling its fleet size.

Recently, Franbo Lines announced an order for four 63,500-dwt Ultramax bulk carriers from a mainland Chinese shipyard. Delivery of the new vessels is expected in May, July, August, and November 2025. The price per vessel is less than US\$32.5 million, with a total transaction value of approximately US\$130 million (approximately RMB 941 million).

For reference, Clarksons data shows that the current price of a 61,000-64,500 dwt Ultramax bulk carrier is approximately US\$34 million, a 4% increase compared to US\$32.75 million in the same period last year.

It is understood that this order was received by Jiangsu Haitong Ocean Engineering Equipment Co., Ltd. The new vessels will use traditional fuel and meet Tier III NOx standards. Franbo Lines has secured long-term charter contracts with charterers in Singapore and Hong Kong for these new vessels, with an estimated gross profit margin of approximately 45%, significantly higher than pre-pandemic levels.

This is the first time Franbo Lines has collaborated with a mainland Chinese shipyard, marking a departure from the company's past practice of ordering vessels only from Japanese shipyards. Franbo Lines explained that these four vessels were built using slots freed up by the mainland shipyard through rescheduling of its delivery schedule. Given that most shipyards globally won't have available slots until 2027, these new vessels will be delivered next year.

In addition to the earlier delivery date, Franbo Lines executives revealed that competitive pricing was also a factor in the company's choice of Haitong Ocean. An executive stated: "We have inspected vessels built by Haitong Ocean and found them to be of good quality. The new vessels will also be equipped with Japanese-made equipment."

It is understood that Franbo Lines was established in 1998. Starting with ship agency services, it initially focused on general cargo between the two sides of the Taiwan Strait and South Asia, gradually expanding to Far East routes and eventually transforming into an ocean shipping company serving five continents globally, aiming to become a global benchmark shipping group.

Franbo Lines' main clients are large shipping groups in Japan and Europe and America. Its fleet includes multi-purpose heavy-lift cargo ships and bulk carriers (mainly handysize and supramax), with plans to build an environmentally friendly and energy-efficient fleet and continuously replace older vessels. This strengthens the fleet's ability to operate on global routes and maintains a competitive advantage through high-tech, high-efficiency, and high-value shipping services.

Currently, Franbo Lines is accelerating its fleet renewal and expansion. Building energy-efficient vessels complies with the IMO's new emission regulations and meets international charterers' requirements for energy-efficient vessels. When the company went public in 2014, it only had seven 10,000-ton general cargo ships. After securing a long-term charter contract for wire and cable-dedicated vessels, the company ordered five 17,000-ton general cargo ships from Honda Heavy Industries in Japan.

Subsequently, starting in 2021, Franbo Lines ordered two 40,000-ton handysize bulk carriers each from three Japanese shipyards—Nakatani Shipbuilding, Onomichi Shipbuilding, and Hakodate Dock. Four of these vessels from Nakatani Shipbuilding and Onomichi Shipbuilding were delivered last year, and the two from Hakodate Dock will be delivered this year.

Franbo Lines' fleet currently comprises 18 bulk carriers. Chairman Cai Bangquan previously stated that at least 20 more new vessels are expected to be built in the next 10 years. He believes that a total fleet size of 50 vessels would be more in line with economies of scale. Based on the long-term contracts currently signed for the Franbo Lines fleet, the company is confident that profits will further increase in 2024.

Last year, Franbo Lines' consolidated revenue was NT\$1.338 billion (approximately RMB 298 million), gross profit was NT\$610 million (approximately RMB 136 million), and net profit after tax was NT\$424 million (approximately RMB 94 million).

In the first quarter of this year, Franbo Lines' revenue reached NT\$390 million (approximately RMB 87 million), a year-on-year increase of 51.74%; March's revenue was NT\$131 million, a month-on-month increase of 5.84% and a year-on-year increase of 35.21%. The company's vice general manager and spokesperson, Lin Shenghe, pointed out that the significant increase in revenue was due to the addition of four new 40,000-ton high-specification energy-efficient handysize vessels last year, with two sister vessels to be delivered in June and September this year, and five-year long-term contracts already signed with international companies in Japan and Canada.

Along with the addition of new vessels, Franbo Lines is expected to sell two older vessels of around 10,000 tons this year. Based on current market conditions, it is estimated that a profit of US\$3-4 million can be obtained from the sale.

For Haitong Ocean, Franbo Lines' order is its third bulk carrier order this year. At the beginning of the year, Haitong Ocean received orders for two 73,800-dwt bulk carriers from COSCO and two 65,000-dwt bulk carriers from China Ocean Shipping (Group) Company, achieving a strong start to order intake in 2024.

Clarksons' data shows that, excluding Franbo Lines' latest order, Haitong Ocean currently has a total order backlog of 12 vessels with a total deadweight tonnage of 851,800 dwt, all of which are bulk carriers, with delivery dates extending to 2027.