China Merchants Energy Shipping Co., a unit of state-owned China Merchants Group, will hold an initial public offering in Shanghai, as it seeks 5.72 billion yuan ($727 million) to buy oil tankers and liquefied natural gas carriers.The oil shipper plans to sell as many as 1.2 billion yuan- denominated shares on Nov. 20, representing 35 percent of its total capitalization after the sale, the Shanghai-based company said in a statement to the city's exchange today. The company is aiming to buy 14 oil tankers and five liquefied natural gas carriers, it said.Chinese shipping companies are expanding their fleet as the country's economic growth fuels demand for oil, coal and natural gas. China Merchants Energy also needs to replace 10 of its 14 oil tankers ahead of a ban on single-hull vessels.China's rising demand for oil shipments means that China Merchants Energy has promising profitability,'' said Zhu Yuansong, a Shanghai-based analyst with United Securities Co. Still, replacing its single-hull tankers will require huge capital expenditure, which casts uncertainty over the company.''Single-hull tankers have only one layer of steel separating their cargo from the ocean. A United Nations-led ban on such vessels is due to start in 2010, with all single-hulls due to be abolished by 2015.We are facing very big pressure to replace and upgrade our single-hull tanker fleet,'' the company said. Our operation will be impacted if we can't make it on time.
''China Merchants Energy's oil transport business accounted for 72 percent of its total sales in the first half, with bulk business making up the rest, it said. The shipping line will expand its fleet to 47 vessels from 28, including the addition of six very large crude carriers, it added.Rising demand for oil in China and Asia is pushing up rates for hiring oil tankers. The cost of shipping oil from the Middle East to Japan has risen 12 percent over the last six months, according to the Baltic International Dirty Tanker Index.China Shipping Development Co., the country's biggest oil carrier, said last week it plans to buy 42 dry-bulk cargo ships from its parent company to expand shipments of coal, cement, iron ore and other materials.China International Capital Corp., an investment bank partly owned by Morgan Stanley, will manage China Merchants Energy's share sale.
