ESL sets sail toward expansion with new ultramax vessels

The Ethiopian Shipping and Logistics (ESL) has renewed hopes for building two additional ships at the Chinese shipyard after the relevant authority approved the initial investment.

The procedure has taken longer, even though the National Bank of Ethiopia (NBE) approved the request to get foreign currency in order to purchase two enormous, brand-new vessels.

The company, which presently operates nine bulk carriers in addition to a recently acquired used ultramax, a midsize vessel, has been working on a proposal to purchase two vessels in order to increase the scope of its maritime freight business.

The state-owned logistics behemoth, ESL, has been expanding its fleet of ultramax ships.

In an effort to grow its maritime industry, which includes the profitable cross-trade service, a crucial market niche for producing hard currency, ESL has made the decision to add more ships to its fleet, which was previously mostly made up of handysize ships.

According to the plan, the state firm is expected to purchase two ultramax ships with a gross weight exceeding 63,000 in the near future.

An international bid was put out in the previous fiscal year, and it was won by Xiangyu, a company from China that currently dominates the global shipbuilding market.

ESL and the firm have finalized the framework agreement for the project’s execution; the specifics will be decided upon when the financial matter is resolved.

However, because of the foreign exchange difficulty, the procedure would not proceed. The logistics company is currently among the largest public enterprises that produce hard currency, but in order to get there, it had to go through additional requirements.

The central bank requested the company to provide its clarification over the procurement project last year.

The financial allocation from the publicly owned financial behemoth Commercial Bank of Ethiopia (CBE), which is anticipated to unleash the foreign currency, directly impacts the case.

The CEO of ESL, Berisso Amallo, told Capital that NBE has been persuaded to purchase additional vessels by his company, even if the matter is still at CBE. He said that his organization is aware of the current correlation between the issue and the hard currency shortage the nation is experiencing.

“But they do give us hope that the first payment will be released by July, which is the start of the next budget year,” he stated.

He stated that he anticipated receiving the first payment in the upcoming months, which would enable the builder to start building right away.

Even though construction is anticipated to take longer than two years, he also stated his wish to board the ship as soon as possible. According to the agreement, ESL will cover thirty percent, and CBE will arrange the remaining seventy percent of the funds needed for the purchase of the two vessels, a process that is expected to take more than two years.The money will be paid in five equal installments of twenty percent each. The framework agreement states that the first payment will be made upon contract signature, with the remaining amount to be paid for steel cutting, keel laying, launching, and delivery.

Wondimu Denbu, Deputy CEO for Corporate Service at ESL, recently told Capital, “We need the foreign currency on five payment schedules that we clearly explained to NBE in filing.”

According to industry experts, purchasing a brand-new ship takes more than two years since shipbuilding is similar to obtaining building construction.

The new ships will be dry carriers with an ultramax type carrying capacity of more than 63,000 DWT, per the deal. At the moment, ESL has nine ‘handysize’ dry carriers with a DWT of around 28,000 each.

Recall that approximately 12 years prior, the prosperous logistics company set out to buy nine vessels, including two tankers, for a total of USD 293.5 million.

This was made possible by a loan guarantee from the Export Import (EXIM) Bank of China, which brought the total number of vessels acquired to 11, until recently.

A year ago, ESL swapped in its first-ever 42,000 DWT tankers, Bahir Dar and Hawassa, for the ultramax dry bulk carrier MV Abbay II. This is also the company’s first midsize vessel.

A delegation headed by the CEO visited China a week ago to talk about acquiring new ships in order to expand its fleet of marine assets.

The CEO, however, is hesitant to divulge the details because it is still in the early stages.

The post ESL sets sail toward expansion with new ultramax vessels appeared first on Capital Newspaper.

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