Rongsheng to deliver 10 giant ore ships to Vale this year

HONG KONG Tue Mar 20, 2012 8:56am EDT

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HONG KONG (Reuters) - China Rongsheng Heavy Industries Group Holdings (1101.HK), the country's largest non-state-owned shipbuilder, said it planned to deliver 10 very large vessels to Brazilian mining giant Vale (VALE5.SA) (6210.HK) this year.

Rongsheng delivered the first of the 12 very large ore carriers (VLOCs), the largest bulk carrier in the world, ordered by Vale in November but the second and third were delayed to March or April from last year, chief executive Chen Qiang told reporters at a results briefing on Tuesday.

Vale's plan to cut transport costs with a fleet of giant "Valemax" (VLOCs) ran into trouble in January after China refused to allow the 400,000 deadweight ton (dwt) vessels to dock at its ports, triggering concerns that Vale may have to delay or cancel its VLOC orders.

But Chen said most of the VLOCs ordered by Vale will be delivered this year. "There maybe leaving one to be delivered next year, at most," he added.

Rongsheng also has orders to build four VLOCs for Oman Shipping Co, which will charter the ships to Vale.

The shipbuilder, which has been hit by rising yuan and a supply glut amid a shipping industry downturn, posted a flat net profit of 1.72 billion yuan ($272 million) for 2011. It missed consensus forecast of 2.42 billion yuan from 11 analysts polled by Thomson Reuters I/B/E/S.

Shares of Rongsheng ended down 4.5 percent, underperforming a 1.1 percent fall in the broader market .HSI. But they rebounded 10 percent this year after dropping 68 percent in 2011.

There had been delay delivery of more than 10 vessels last year due to the European debt crisis and revenue from European clients fell 34 percentage points to 19 percent of total in 2011, Chen said.

Rongshen obtained orders for 39 new vessels worth $1.8 billion in 2011, down from orders for 46 vessels worth $2.26 billion the previous year.

However, it outperformed the industry as new orders received by Chinese shipbuilders decreased more than 58 percent to 29.3 million dwt last year.

"The market will continue to be tough in the first half and should improve in the second half as the Europe debt crisis eases," Chen said.

Rongsheng will actively seek upgrading and restructuring of its product offerings to help counter the current market downturn, he added.

Rongsheng makes bulk carriers, crude oil tankers, container ships, offshore engineering products and engines, with its customers including Cardiff Marine Inc, Frontline Ltd (FRO.OL), Geden Lines and China National Offshore Oil Corp (CNOOC).

($1 = 6.3233 Chinese yuan)

(Reporting by Alison Leung; Editing by Chris Lewis)

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