(Yicai Global) Aug. 22 -- Two Chinese ship builders have secured a letter of intent from French shipping firm CMA CHM SA to place orders worth around CNY9.6 billion (USD1.4 billion) after beating out competition from three South Korean competitors.
The European transportation giant penned the deal with two affiliates of state-owned China State Shipbuilding Corp, Hudong-Zhonghua Shipbuilding Group Co. and Shanghai Waigaoqiao Shipbuilding Co.
Hudong-Zhonghua will build five of nine 22,000-TEU super large container ships, each costing up to USD160 million, maritime media Trade Winds reported Aug. 20. Shanghai Waigaoqiao will build the remaining four.
TEU stands for twenty-foot equivalent unit and refers to the volume of one 20-foot long standard container.
The Chinese firms beat out South Korea's three major ship makers, Hyundai Heavy Industries Co. [KRX:009540], Samsung Heavy Industries Co. [KRX:010140] and Daewoo Shipbulding & Marine Engineering Co. [KRX:042660], despite South Korea's industrial circles believing Hyundai would bag the contract.
It is undeniable that China's shipbuilding industry has been catching up technically with South Korea, said representatives from the Korean companies, but it is regrettable for us that it won this bid for such an unusually large order.
The Korea Institute for Industrial Economics and Trade believes China's shipbuilding sector will catch up with South Korea in two to three years.
In the first half of this year, China's ship builders took on orders totaling 2.9 million compensated gross tons, edging out South Korea's 2.83 million to become the global leader, according to data from British market research institution Clarkson. The latest order will further widen the gap between the two.
Compensated gross tonnage is a way to calculate production volume while factoring in the unique aspects of different ship types.