Chinese furniture maker Loctek Ergonomic Technology Corp. wants to beat the supply chain bottlenecks and tight shipping capacity, by building its own container ship.
The company has ordered a 1,800 TEU container vessel for US$32.6 million from compatriot shipyard Huanghai Shipbuilding. The ship will be delivered in March 2023.
In its filing to the Shenzhen Stock Exchange on 27 January, Loctek, which has factories in Ningbo, China and Ho Chi Minh City, Vietnam, said that it had been facing logistical difficulties since the Covid-19 hit in 2020.
Loctek said, “The pandemic has continued to spread, affecting the efficiency of ports worldwide. Security, timeliness and reliability of the supply chain have been severely challenged.”
Movement restrictions have encouraged online purchases, generating more shipping requirements.
Loctek continued, “The company’s online business has grown steadily and rapidly. Building our own ship will improve customer service through speedy delivery of goods bought online, and also help increase the inventory turnover rate. Owning our vessel will also realise synergies between our warehouse and transportation, therefore reducing our logistics costs.”
While vertical integration between cargo owner and ship operations has been seen in dry bulk and tanker shipping, it is rare in container shipping.
Linerlytica analyst Tan Hua Joo opined to Container News that while some shippers are seeking alternatives in response to high freight rates, Loctek’s management may not fully understand the risks of ship owning.
“The newbuilding price has already increased by over 30% and freight rates will surely correct once supply and demand conditions normalise, so Loctek could find itself stuck with an expensive asset in future that cannot be operated as efficiently, compared to commercial carriers,” he commented.
Martina Li
Asia Correspondent
