A Study On VLCC Fleet Development For Chinese Shipping Companies

Energy plays a vital role in economic development. With the continuing rapid growth of China’s economy, the oils in China’s energy structure occupy more shares. Since China is not an oil-rich country, a lot of oil to be imported from abroad. The dependence on foreign oil has been rising quickly in recent years and may reach to 61.5% in 2020. There are long maritime transport mileages between oil-exporting countries and China, the use of VLCC(Very Large Crude Carrier) becomes the most economical mode of transport.For the requirement of transporting of import crude oil, domestic shipowners, especially large state-owned shipping companies started to develop VLCC fleet at the beginning of this century. However, there are still fewer number of VLCC and we have to depend on foreign supertankers to transport imported oil. In contrast, Japan’s shipowners transport 80%-90% share of all imported oil, and the United States’ take 70%. In order to achieve crude oil transportation security and stable supply, Chinese government proposed “National Shipping for National Oil” policy to improve the shipping capacity of domestic shipping companies.Since 2011, under the influence of slowdown in shipping demand growth and over tonnage delivery, international oil shipping markets have been slowing down, so do as VLCC shipping market. Energy demand growth is slowing down due to global economic recession, and tanker capacity is increasing more over than the transport demand growth. Under this international environment, how do Chinese shipping companies to take advantage of the “National Shipping for National Oil” policy to expand VLCC fleet, with feasible planning, to improve the competitive situation, is worth of our in-depth study.In this study, multiple linear regression method is used to predict the amount of Chinese imports of crude oil at medium and long term, in order to assess the total tonnage requirement of VLCC fleet. Compare with the supply of current Chinese VLCC tonnage, to find the supply gap of China’s VLCC tonnage. In this context, the factors affecting VLCC tonnage expansion decision making and the different ways to expand VLCC tonnage have been analyzed, economic feasibility analysis has been made for VLCC newbuilding. Using Porter’s Five Forces model analyzes the competitive environment which Chinese VLCC fleet faces. With the result of up said study and analysis, constructive comments are made for the expansion of Chinese VLCC fleet.