Hainan`s Grand China debts mount, reneges on charter payment pledges

HAINAN province`s Grand China Logistics, a subsidiary of China transportation group HNA, is to pull out on two chartered capesizes, its largest dry bulk vessels, because of loss-making on the spot market caused by hefty daily charter rates, reports London`s Financial Times.

Grand China also owes for fuel which has led to threat of vessel seizure by a US federal court at the bidding of its Hong Kong-based supplier United Bunkering & Trading.


The company has owed money on its early handover of the Oslo- and Singapore-listed Golden Ocean Group vessel the Ocean Minerva but has since come to an agreement on compensation. A payment of US$18.6 million is sought by the Vafias Group in English and US courts for handing back early on a charter due until 2015.


At a cost of $50,000 a day, the capesize vessels can make on the short-term spot market an average $18,000 daily. However, despite a lack of returns, cutting long-term charters incurs ongoing payments for the duration of the agreement.


The Vafias Group, which last year successfully pursued GCL and HNA for non-payment in the English and US courts, is seeking $18.6 million in the US courts after GCL handed back early a vessel it was due to charter until 2015, compensation is due in February 2012.


The spate of delays on chartered payments include China`s shipping unit Shagang of Jiangsu Shangang steelmaking group which has an outstanding debt of $4.8 million on the M/V Houston on a charter running for five years. Prior to this, Cosco stopped its payments on long-term charters in mid-2011 until it was threatened by vessels seizure by shipowners.