Chinese Carrier Makes $48M Profit by Flipping Order on Two Boxships to MSC

With demand remaining hot for all container vessels, China’s BAL Container Line has found a novel means of making a significant profit before it ever took delivery of its ships. Two years after ordering two containerships, and before the keel has been laid, BAL is making a hefty profit by selling the ships to MSC Mediterranean Shipping Company.

BAL was established 12 years ago and mostly has been a non-vessel operating company focused on the inter-Asian markets. During the boom in the container market in 2020 and 2021, BAL was attracted into the international market reporting it had launched service to Europe in early 2022 and later in the spring operated its first voyage to the West Coast of the United States. By February 2022, they were touting that BAL’s fleet capacity was over 32,000 TEUs, which the company highlighted as ranking 39th in the world and 8th in China as per the Alphaliner Top 100.

Believing in the prospects for the market, BAL in June 2022 placed an order for two 14,000 TEU containerships to be built by China’s Jiangnan Shipyard, a division of China State Shipbuilding (CSSC). The ships were scheduled for delivery in 2025 and the company also took two options to build additional tonnage.

As the market turned, BAL was reported to be one of the smaller carriers that retreated first from the European market. As its parent company was preparing to go public in Hong Kong, it reported that it had not operated European voyages due to the falling container freight rates. The focus shifted back to Australia and inter-Asia.

In a stock exchange filing on July 3, they reported terms of an agreement to sell for a profit the two ships to be built in China to MSC. The company explains the deal saying that “it will realize the value of the vessels in advance which is expected to bring a net income of approximately $48.5 million.” In addition to improving cash flow and financial stability, they note it will “bring significant financial gains to the group.”

Under the terms of the construction order, BAL has made two installment payments to Jiangnan totaling $84.3 million. They were obliged to make a third installment of 10 percent when the keel was laid and the fourth and final installment of 60 percent of the purchase price when the vessels were delivered next year.

Hungry for additional capacity as it continues its unprecedented growth, MSC has agreed to pay BAL $133.3 million for the two vessels and assume the additional $196.7 due to Jiangnan Shipyard and CSSC. The total purchase price of the two vessels is $330 million. Further, MSC will pay an additional $3.3 million to BAL for equipment that was purchased for the two vessels. BAL will continue to manage the construction project but walk away from the ships with a profit of $48.5 million nearly a year before the vessels are completed and make their first sailings.

There was no mention of the construction options, but BAL a year after suspending its trans-Pacific routes reported it was resuming in 2024 service between China and Mexico using a chartered vessel.  The company may have also expanded its option to a total of four 14,000 TEU vessels but for now, found a strong profit by flipping its orders to MSC.