PROFILE ■ ■ ■
Scrapping champion Few have been more vocal on shipping’s malaise than Hosco’s Gao Yanming, as Katherine Si finds out
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his January marked an anniversary of sorts – Gao Yanming’s 15 years at the helm at one of China’s most highly rated shipping lines, not that this even-minded executive paused to celebrate. Come rain or shine for the shipping industry Gao has had a level head, speaking his mind for the greater good of his peers, and few have done more among local owners to foster a more sophisticated maritime culture in China. Downturns are nothing new to Gao. He took over Hebei Ocean Shipping Co (Hosco) in 1998, when the then 18-year-old line was on its knees. It was an ailing, state-run small company – arguably the only thing significant about it at the time were its debts. Established in 1980 Hosco was a bulker division of Cosco until it was dropped following years of losses. Gao was asked by Hebei province, surrounding Beijing, to drop his own successful private firm and come and resurrect the sinking outfit. At the time the fleet had a total tonnage of 64,000dwt, the Baltic Dry Index stood at 780 points and many thought Gao was crazy to take on the challenge. Gao was given a free hand to take it over, turn it private, and shift headquarters to freewheeling Hong Kong. Successful cost cutting, streamlining, and purchases at the nadir of ship price
cycle in the late 1990s – when panamaxes were sold for less than $2m a piece – started the turnaround. As such Hosco, and subsidiary North China Lines, were guinea pigs for the raft of listings that would change the faces of larger state behemoths (read Cosco, China Shipping, Sinotrans) in the decade to come. Like the tides, Hosco has grown and contracted with the markets. During shipping’s great boom years the Hosco operated fleet went as high as 170 vessels. Reading the runes, however, Gao pulled back from the Lehman Brothers abyss, faster and more forcefully than others. The downturn in shipping, which if one discounts the brief false dawn of 2010, is now into its fifth year. From the outset Gao could see the vast oversupply of ships and has been among the most vocal champions of scrapping ships. In this regard he has led from the front. Hosco’s fleet has been chopped in half, to less than 70 operated of which 35 are owned, with plenty of ships recycled and many more charters not renewed. The owned fleet is now very young as a result, averaging just four years. Gao tells SinoShip that the shipping market is still suffering its worst crisis for more than a hundred years. “The key reason for this,” he says, “is the disastrous oversupply which has led to an extreme imbalance of supply and demand.” Gao suggests that worldwide tonnage is still
around 40% more than is actually needed at present. He lambasts fellow owners who are taking advantage of today’s extremely low newbuild prices at shipyards. In a number of recent letters to Yang Chuantang, the minister of transport, Gao has urged for more policy support to increase the volumes of old local ships being scrapped as well as to improve the level of Port State Control (PSC). “China should accelerate phasing out old vessels to promote the restructuring of the shipping industry,” Gao said in one letter. The government should introduce policies to encourage scrapping old vessels, for example, exempting income tax on scrapping vessels for a certain period, Gao reckons. Also, the ministry should lower the mandatory scrapping age of vessels. Currently the mandatory scrapping age of tankers, bulkers and boxships in China is 31 years, 33 years and 34 years respectively, which makes China among the countries with the highest ship ages. Gao has suggested the scrapping age of bulkers and boxships should be lowered to 27 years, and tankers to 25 years. In the meantime, Gao, in what might be viewed in international circles as a protectionist move, has also suggested the government should have stricter regulations on foreign vessels with ages of more than 20 years entering inland rivers and seas, ostensibly to protect the safety and environment of the Yangtze River, Pearl River and Bohai Sea. “Relevant authorities have started to discuss these issues,” Gao tells SinoShip, “but actual implementation is likely to take some time.” Regardless of how long it might take, Gao is a rarity among today’s shipowning community, practicing what he preaches.
NEED TO KNOW NEED TO KNOW
Hosco China’s third largest bulker operator, founded in 1980 originally in Hebei, but since switched to Hong Kong. Fleet now numbers around 70 ships. Headed by Gao Yanming for the past 15 years.
Sinoship SPRING 2013
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