Speculation: China may be getting ready to move... ( Archived) (14)

So I am reading this story in the El Arabiya News about a Chinese Airline Hainan Airlines borrowing 150 million dollars from an Islamic banks coalition to buy ships. I am digesting this and the more I read the funkier it sounds and little distant bells start to go off.



The article above focuses on how the Islamic banks are making inroads into China, but I am thinking that is not the real story here.

The acquisition of ships by an airline is analogous to a chicken farmer suddenly deciding to also acquire and manage a cattle herd at the same time. It can be done, but while there does exist some overlap in both types of agricultural income, there is enough difference that potential disaster lurks. I also note that apparently for whatever reason Western banks either weren't approached for the loan, or, they were and turned it down.

So I start speculating. What kind of ships? A little checking with other sources shows the market for deep water container ships and oil tankers is both glutted and also expensive to enter into with the new behemoth container ships and tankers costing upwards of 185 million each. With well less than that as the loan amount I wonder what HNA is up to?

I do more digging. The tourist passenger ship market is dying. Hardly anyone books long ocean voyages for fun anymore. Not one a plane can have you there by tomorrow. But HNA is buying ships. Why? For who?

Then I think, buying them for the PLA? What kind of ships would the PLA Navy want and for what reason would they need a front to make the purchase?

Then I remember a study I was reading a few months ago. About something called OSVs. Offshore Supply Vessels. Their average projected lifespan is about 25 years, but with refits some can and do last much longer. About a dozen used ones have been put on the market recently for about 1.2 million dollars apiece. New ones only cost about 12 million apiece. In the US OSVs serve two purposes. They transport shipping containers from one city to another city as a cheaper, but slower, alternative to shipping overland. AND they deliver supplies and personnel to Oil rigs and remote island installations. Whoops.

Here is the study (in pdf) pertaining to the development of an OSV market in Texas.



Focus on chapters 4 & 5 in the study (the rest pertains to Texas and is only relevant to a Texan). Note also the high speed ocean capable ferry boats discussed in Ch 5. They are capable of 30 knots. The study dates to 2008 but makes it plain these boats are not profitable because they gulp fuel. For a business, that would be bad. Sure enough one of the Alaskan cruise lines mentioned went bankrupt a few years ago. Would gulping diesel fuel be so bad to a military running bootlegged oil rigs? So I check on Google.



Sure enough. Used High Speed Ferry boats now going for only 1 million to 1.1 million apiece.

In previous writings myself and others have written that until such time as China gets the logistics capability to move large numbers of troops and shipping containers across an ocean, don't look for too much activity at the new man made islands, or on the 'experimental' oil rigs going up nearby.

All this speculation I am doing is pure conjecture of course, fueled only by an old state government study, and an obscure financial news story. That being said, I suspect that as soon as HNA gets it's fleet (I look for them to acquire cheaper used ships at first, getting newer ones after the off shore rigs in disputed waters begin turning a profit) up and running, China will begin further expansions.

What do you think?

Noting also China's 4 nuclear type 92 subs of Boomer type (JL-2 MIRV SLBMs) are expected go operational later this year with China doing her first deep water submarine patrols fairly soon.

I put it together and maybe I see a timetable of operations shaping up?

Rizlared - China's use of PLA Unit 61398 personnel to hack into US Govt OPM and private industry servers shows us exactly who it is that can't be trusted in any way shape or form. Additionally, I personally have downloaded and sandboxed in my PCs here Droid apps coming out of China and on many occasions detected them (believing they were in a phone) attempting to transmit info (including contact address books) to servers located in China. While the Droid phone hacks may just be internal security attempting to do link analysis regarding who knows who in Asia the many attacks against US Govt and Fortune 100 companies are purely malicious and beg for serious retaliation (which I believe is one of the main subjects of President Obama's meeting this week with President Xi Jinping of China). Noting also the discovered hacking into Apple software this week. And not forgetting the not too long ago salting of the ground outside major US Govt buildings by (filmed) Chinese diplomats with USB Thumb drives with sophisiticated viruses inside them. The evidence against Unit 61398 is pervasive enough that at least 5 indictments against specific members have been unsealed in California for their role in the theft of US Commercial secrets while leaving malware behind on the computers. And let us never forget the Norinco scandals of the Clinton era where Norinco (a Chinese govt owned company) was caught supplying fully automatic AK 47s to street gangs in the US (as a direct result Norinco lost the right to sell directly in the US) from their 'free trade' facility on the West Coast. That was more than just one or two folks here taking bribes, as first the machine guns had to be shipped here disguised as legal semi-auto only AK clones. I won't even go into the many instances (over 100 last time I was briefed) of Chinese PLA and MPS persons coming into the US on tourist visas and following, harassing and in some cases threatening (the relatives of, still in China) former Chinese citizens turned dissident. That is this year. Point is, China has already proven itself to be a country prone to hostile actions against US citizens and organizations and anything they do, even something as crazy as having an airline suddenly get a foreign loan to buy boats, needs to be examined for ulterior motives from all possible angles.

Not China, I know, but long ago (1877) there was a battle at a place called Plevna. Turkey vs. Russia. The Russians got creamed. It seemed that while they had been totally paying attention to every little purchase made my the Turkish military before the battle, the purchase and reason for of 30,000 Winchester Repeating Rifles by the Turkish cavalry was completely ignored as it was thought to be useless in the coming battle and besides there were no cavalry forces present. LoL, old magician's trick. Watch my right hand and ignore my left hand. What the Russians failed to take into account was the Turks had also discarded the clumsy European single shot rifles of the day and purchased many Peabody Martin (faster loaded and deadly accurate at long ranges) single shot rifles. What the Russians didn't know was the Turkish cavalry had been disbanded and all 30,000 of the Winchester Henry rifles were in the trench in front of them. So the much larger Russian Army began marching towards the Turkish trenches. The Russian rifles and the older Turkish rifles could reliably hit and kill at 400 yards. It was somewhat of a shock to the marching Russians when their soldiers began dying over 2,200 yards away from the Turkish lines (some said 3,000). Still on they came and the Peabody Martin rifles made a terrible slaughter. At 100 yards the Turks laid down their rifles and thinking the Turks were out of ammunition the Russians yelled and charged. Then the storm broke.

30,000 Winchester lever action rifles suddenly opened up on the Russians at point blank ranges. What the Russians later learned is each Turkish soldier had been given 100 rounds of ammo for their Winchester and each Turkish soldier also had a box of 500 more bullets placed beside him. At the same time designated snipers specifically targeted every Russian officer they could identify. On the first wave alone the Russians lost over 5,000 soldiers. Their command staff, not having any clue what had gone wrong, tried it again in a few hours. Same result. The Russians kept trying until over 30,000 dead Russians littered the field. This battle, where no one at all (except the Turks) had paid any attention to what a repeating rifle could mean, marked the absolute end of the single shot rifle in European warfare.

ooby_dooby - I did indeed examine that. However note this list of the worlds 110 largest container ships. Note that only 15 of them are owned by China and at least two of those are totally leased to other countries. A TEU is a measure of how many shipping containers these ships can carry. 13,000 to 20,000 shipping containers per ship is norm for those monsters. As stated in the uploaded documents and substantiated by other links, those monsters cost way more than the size of the loan the airline is seeking. Yes, for about 100 million they could probably buy a used worn out one, then spend the other 50 million to refurbish it, but that doesn't strike me as a very efficient use of the money. There is also the fact that about six companies already dominate the market and have solid contracts with the best trade routes. So if the airline was to try competing, it would be an uphill battle.


In the dawning days of the behemoth shipping container ship some American freighter companies (Grace Line, etc.) tried to use their smaller OSV sized ships to ply the South American coastal cities while overseas some European shipping companies tried that in Africa. One by one they went bankrupt. The ones that lasted the longest focused on the off shore oil rigs as their cutomers. A ship (or string of tug towed barges) that can has a TEU of only 20 to 50 simply can't economically compete against a ship that holds thousands. As populaces and infrastructure grow more dependent on shipped goods, they deepen and widen their harbors and put in infrastructure designed for the bigger ships. This has already happened in South America and is currently happening in many African ports.

Likewise the smaller more affordable ships simply aren't blue water safe. They do best in coastal waters. Pacific storms simply aren't that forgiving of smaller ships. Admiral Halsey learned that the hard way during WW2 and the US Navy remembers that. Yes, the airline could buy 100 small OSV ships and run them back and forth across the Pacific and Indian Oceans to Africa and South America, but those ships would be out of the element they operate best in. Also they would be economically outclassed big time by the super size ships going to the same ports. Eventually a bankruptcy would follow. I can't see any thinking banker approving that as the intended business model.

So I remember 1877, a little place called Plevna and misdirection and how well it worked. I also look at the man-made islands China has built and is still building (but which are not yet fully manned), I note their experimental oil rigs in contested waters and I wonder how they would service the logistical tail if those experimental oil rigs find oil and dozens of them suddenly spring up all over the South Asian waters. We won't even (yet) consider just how handy a hundred or so strangely available OSV ships to bring supplies would be to the PLA, if an invasion of Taiwan suddenly happened.

So no. I do not believe the 150 million is to buy one used, worn out behemoth container ship to compete with the established companies. I believe it is to buy 100 or so used OSV ships to resupply the not yet erected but coming soon dozens of oil rigs, to transport staff and supplies to the man made islands, and maybe even something more nefarious since this is the year China's nuclear submarines finally go operational and head out to deeper water.