China Qinfa orders two bulk carriers

Two wholly-owned subsidiaries of China Qinfa Group, China's largest non-state-owned coal supplier, have signed contracts worth a total $69 million to build two 82,000 dwt bulk carriers at China State Shipbuilding Corporation's Guangzhou Longxue Shipbuilding.

The first vessel is scheduled for delivery on or before March 31, 2012 and the second on or before September 30, 2012.

China Qinfa plans to use bank borrowings to finance the payment of about 70 percent of the construction cost, it will fund the remainder from its internal financial resources. Each ship will be paid for in five installments:

First installment -- 10 percent -- within five business days of receiving a refund guarantee from the builder;

Second installment -- 20 percent -- within five business days after the commencement of construction

Third installment -- 20 percent -- within five business days after keel-laying of the first section of the relevant vessel;

Fourth installment -- 20 percent -- within five business days after launching;

Fifth installment -- 30 percent -- concurrently with delivery of the vessel

China Qinfa previously placed orders for two newbuildings, one in October 2009 and the other in December 2009, respectively. Its directors consider that the timing is right for construction of two vessels as the current construction cost is about half the highest level 2008. The Group plans to dispose of one of its existing older vessels this year, although no concrete plan or agreement has yet been reached yet. As its trading volume continues to increase, the Group says the addition of two vessels to its fleet will enhance its ability to control its ship transportation costs.