News / Zhonggu spreads its wings to meet manufacturing shift

Zhonggu Logistics, China’s largest coastal container carrier, expects to diversify more into intra-Asia shipping as Chinese manufacturing shifts to other locations, especially within Asia.

This has resulted in some volumes moving away from inland waterways to intra-Asia routes and, as a result, Zhonggu is switching to mid-sized vessels that can carry more containers.

In an investor conference, Zhonggu executives explained the rationale for the company’s recent order of six 6,000 teu ships, with Hengli Heavy Industry building four and China Merchants Shipyard (Jinling) the other two. The Hengli contract has options for two more ships, priced at $84m each.

One executive said: “Our local customers’ supply chains are moving outside of China. Now, they need to ship containers not only within China, but also internationally, so we need to follow them.”

In terms of tradelanes and ports, 6,000 teu vessels are more flexible than those exceeding 10,000 teu. In many regional ports, especially in South-east Asia, the Indian subcontinent, and other emerging markets, constraints such as draught restrictions, berth capacity, and quay crane capacity persist.

Larger ships are more suitable to networks focused on a few hub ports, and are more sensitive to high load factors, and demand fluctuations. In contrast, 6,000 teu ships can do multiple port calls and offer better slot costs than feeder ships, making these compatible with shortsea trades.

Zhonggu has prioritised business development in South-east Asia, India, South Asia and the Middle East. Last year, Zhonggu began testing these markets by retrofitting older feeder vessels to launch routes to Vietnam, the Red Sea, and the Indian subcontinent.

The idea is to develop working experience on these routes before the newbuildings are delivered in 2028.

Zhonggu is the 35th-largest liner operator, with total capacity of 53,664 teu from a dozen owned ships and 50 chartered vessels.

The supply-demand picture for 6,000 teu ships is also better than that of larger vessels. Clarksons data shows that newbuildings in this range form just 1% of the active fleet, compared with more than 700% for 15,000-18,000 teu vessels.