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Pacific Basin Says New Ship Orders Address Green Concerns

Charlotte So – Updated on Aug 11, 2008 – SCMP

Specialist dry cargo shipping company Pacific Basin Shipping believes the four roll-on/roll-off vessels it has ordered will help address challenging environmental issues in Asia.

“We have a strong view that environmental issues are going to become more important to the world,” said chief executive Richard Hext.

Governments in Europe were eager to take long-haul trucks off the road and replace them with roll-on/roll-off vessels plying the continent’s ports because carbon emissions from the vessels per unit of cargo per mile, were lower than those of trucks, said Mr Hext.

And the environmental awareness in Beijing as a result of its campaign to clean the air for the Olympic Games would reshape attitudes towards pollution in both China and Asia, he said.

“As a result, we expect demand for roll-on/roll-off vessels will grow in Asia,” said Mr Hext.

Pacific Basin ordered four roll-on/roll-off vessels in December for delivery between next year and 2010. The deal carries options for two additional vessels in June. The orders, worth US$577 million, amounted to 80 per cent of Pacific Basin’s total new vessels commitments.

Although management was confident of new business it could do with its roll-on/roll-off vessels, analysts said the outlook for the service was still unclear.

“We consider that forecasting rates for the sector is difficult at this stage as the large-sized [roll-on/roll-off ships] are new to Asia,” according to a Cazenove report.

The company will now be relying on its track record of being able to discover new markets and position itself in a market sector with less competition.

By focusing on handysize vessels of between 25,000 and 34,999 deadweight tonnes, it enjoyed 4-1/2 years of profit growth in the past 5-1/2 years, said analysts.

The new vessels ordered could operate at 21.5 knots (40km per hour) and were more fuel-efficient than the firm’s existing ships, said Mr Hext.

In addition, the company has invested US$40 million in a mainland gas supply company, Green Dragon Gas, to prepare for tougher environmental requirements on shipping.

“It is possible that shipping companies will be required to be carbon-neutral,” said Mr Hext.

Green Dragon Gas produces natural gas from coal-bed methane in a process that reduces the amount of methane released into the atmosphere during coal mining.

Since methane oxidises in the atmosphere to form carbon dioxide, Pacific Basin anticipates it will qualify for carbon credits that could be used to offset the greenhouse gas produced by its ships in the future.

More on scmpir.com For IPO news, listed company reports, announcements and press releases, go to our new investor relations website. For Pacific Basin, go to pacbasin.scmpir.com

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