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China has become the world's leading shipbuilding nation, offering international shipowners a compelling combination of production capacity, established supply chains and competitive pricing. For owners considering a new commercial cargo vessel, a Chinese shipyard can present an attractive opportunity—but choosing the right yard, securing the right financing, and managing the construction process remain essential. For owners who have struggled to arrange conventional finance, the Chinese market can also open doors that other markets may not. Why Consider China? According to UN Trade and Development (UNCTAD), China accounted for approximately 54.6% of global shipbuilding output by gross tonnage in 2024, ahead of South Korea at 28% and Japan at 12.6%. More recent industry data reinforces this dominance. In 2025, China's shipbuilding completion volume reached 53.69 million deadweight tonnes (DWT), representing 56.1% of the world total, while new orders captured 69.0% of the global market and the order backlog stood at 66.8% of worldwide tonnage. Cost competitiveness remains another important consideration. OECD analysis of ship orders placed between 2020 and 2024 found that Chinese-built intermediate-size container ships were priced nearly 10% below comparable vessels from other major shipbuilding economies, with a larger differential for certain product tankers. Actual savings will depend on the vessel specification, equipment, contract terms and delivery schedule. These advantages do not eliminate the need for careful due diligence. Shipyards differ considerably in their capabilities, financial strength, quality standards and experience with particular vessel types—and the same is true of the financing options available. Choosing the Right Shipyard Shipowners should assess a yard's: • Construction record and experience with the intended vessel type • Technical expertise and proposed project team • Production capacity and availability of slots • Financial standing and ability to provide refund guarantees • References from previous international customers Independent inspection of the facilities and an assessment of the proposed project team can help establish whether the yard is suitable for the intended vessel. For owners with limited prior experience in China, independent representation during this assessment is particularly valuable. Getting the Contract Right The shipbuilding contract should clearly define the technical specification, price, construction programme, delivery date and payment milestones. Payments should be linked to verifiable progress, with appropriate protection through guarantees, delay provisions and clearly defined procedures for changes to the specification. Governing law, dispute resolution, termination rights and ownership arrangements during construction should also be addressed with qualified legal advisers before signing. The contract and the financing are interlinked: lenders will review the contract terms carefully, and the contract should be drafted with bankability in mind. Financing Through Chinese Banks: Where Advisers Add Value For many international shipowners, the availability and terms of financing are as important as the build price itself. Chinese banks—both public and commercial—offer a range of structures tailored to newbuild projects at Chinese yards, often with an advantage in pricing and alignment with the construction timeline. For owners who have found financing difficult to obtain elsewhere, the Chinese market can offer routes that are not always available through traditional shipping banks or credit funds. Banks and Export Credit The Export-Import Bank of China (CEXIM) is the primary public channel for ship export finance. It offers export credit, and refund guarantees across the full lifecycle of ship construction, operation and management. In practice, CEXIM's provincial branches regularly issue dozens of refund guarantees for individual shipyard projects—for example, supporting a 64,500 DWT bulk carrier newbuild at a private Guangdong yard to help lock in international orders. These guarantees are a critical instrument that reassure the foreign owner that advance payments during construction are protected if the shipyard does not perform. Sinosure (China Credit Insurance Corporation) can insure political and commercial risk, allowing banks to mitigate the credit risk on the shipowner and fund at lower spreads.. Commercial Banks and Leasing Arms A dozen leasing houses operate in China and can support foreign shipowners in the acquisition of ships built at Chinese shipyards. ICBC Financial Leasing is one of the most active ship leasing institutions. As of end-2025, it managed approximately 285 vessels and maritime assets across 32 asset types, with a total value of around RMB 98.8 billion, serving clients in more than 20 countries and regions. During the 14th Five-Year Plan period, ICBC Leasing delivered over 100 newbuildings from Chinese yards. It has also pioneered cross-border RMB ship leasing, with signed RMB-denominated shipping projects exceeding RMB 5 billion. A recent example: ICBC Leasing subsidiaries acquired two 64,500 DWT bulk carriers under construction for sale-and-leaseback arrangements, with delivery expected in 2028. Bank of Communications Financial Leasing (BOCOM Leasing) is the world's largest financial shipowner by asset value. Its green ship assets reached nearly RMB 64.48 billion as of mid-2025, and more than 50% of its shipping lease deployments over the past three years have been green vessels. In September 2025, BOCOM Leasing closed China's first "transition finance" ship financing lease, linking the lease rate to the vessel's actual emission reductions and carbon intensity metrics—a structure designed to lower the capital threshold for owners transitioning to greener tonnage. Common Structures to Consider Refund Guarantee- Bank issues a guarantee to the owner securing the yard's refund obligation for advance payments Mortgage Loan - Chinese Bank lends to the shipowner to fund payments to the Chinese yard against a mortgage on the vessel Export Credit - CEXIM or Sinosure lends to the overseas shipowner or provide a credit insurance cover to a commercial bank to fund payments to the Chinese yard Financial LeaseLeasing - Company owns the vessel during the lease term and charters it to the owner, with ownership transferring at the end through purchase options and/or obligations Why Owners Struggle—and How Advisers Help Not every shipowner can walk into a Chinese bank and secure a loqn or a lease on day one. Common obstacles include: • Limited track record or balance sheet that does not meet a lender's credit thresholds • Unfamiliarity with Chinese banking practice, documentation and credit processes • A contract that is not "bankable"—for example, payment terms or guarantees that lenders will not accept • Currency and structure mismatches between the owner's revenue and the proposed debt • A yard that is not on a lender's approved list or lacks the financial standing banks require • Cross-border legal and security issues that need to be resolved before a credit committee will approve This is where independent structure and financial advice makes a difference. An adviser can: • Assess which Chinese financing channels fit the owner's profile – public bank, commercial bank, or leasing company—and approach the right institutions • Structure the transaction so that the shipbuilding contract, guarantee package and financing documents are consistent and acceptable to lenders • Prepare the owner's credit story, including financial information, fleet profile and projections, in the format Chinese lenders expect • Coordinate between the yard, the bank and the owner so that prepayment guarantees, drawdown schedules and milestone payments align • Identify export credit insurance or guarantee support (for example through CEXI: or Sinosure) that can improve terms or unlock a facility • Negotiate and review term sheets and documentation alongside legal counsel, so the owner understands the security package and conditions precedent Practical Considerations RMB vs. USD financing. Chinese banks increasingly offer RMB-denominated ship finance. This can be attractive if the owner has RMB revenue or expects to settle shipbuilding costs and related expenses in RMB. ICBC Leasing's cross-border RMB ship leasing business illustrates how RMB financing can be linked to RMB-denominated shipbuilding orders and operating cash flows. Tie-in with the yard. Chinese bank financing is often most accessible when the vessel is being built at a Chinese yard. The financing and the shipbuilding contract are typically negotiated in parallel, and the bank will assess the yard's capabilities and the project's viability as part of its credit process. Green and transition-linked structures. The market is moving toward sustainability-linked pricing. BOCOM Leasing's transition finance product—where the lease rate adjusts based on the vessel's actual emissions performance—is an early example of how Chinese financiers are aligning terms with environmental outcomes. Owners planning dual-fuel or methanol-ready vessels may find more favorable terms available. Documentation and legal counsel. Financing documents should be reviewed alongside the shipbuilding contract. Key areas include the security package (mortgage, assignment of earnings and insurances, guarantees), conditions precedent, drawdown mechanics linked to construction milestones, and the interaction between the financing and the owner's supervision rights. Timing. Financing discussions should begin early—ideally before or alongside contract negotiations. Banks need time for due diligence on both the owner and the project, and the financing terms can influence the payment schedule and guarantees negotiated with the yard. Managing Budget and Construction Risks The budget should include not only the construction price but also supervision, inspections, insurance, financing, spare parts, certification, delivery and registration. Currency movements, delays and technical changes can increase the final cost. Regular progress reporting and independent technical supervision help owners monitor expenditure, verify construction quality and identify problems early. From Construction to Delivery Before accepting the vessel, owners should verify: • Completion of the agreed tests and sea trials • Resolution of outstanding defects • Availability of the necessary documentation • Familiarization of the take-over crew Classification, flag-state certification, registration, insurance and operational compliance should be planned well in advance. Key Takeaways • China offers scale, supply-chain depth and competitive pricing—but yard selection still matters. In 2025, Chinese yards captured 69% of global new orders. • Chinese policy and commercial banks provide a full suite of financing tools: mortgage loans, export credit, financial leasing and refund guarantees. • Leasing arms like ICBC Leasing and BOCOM Leasing are major liquidity providers to the sector. • Owners who have found conventional finance difficult may still find viable structures through Chinese banks and leasing companies—provided the transaction is structured correctly. • Link payments to verified progress and protect the contract with guarantees and clear variation procedures. • Budget beyond the build price: supervision, insurance, certification and delivery all add cost. • Independent structure and financial advice—alongside technical supervision—reduces risk from contract negotiation through to delivery. The Bottom Line For shipowners, the opportunity is not simply to build at a competitive price, but to secure the right vessel, to the required standard, with effective control of cost, quality and delivery—and with a financing structure that fits the owner's balance sheet and long-term strategy. Where financing has been difficult to obtain, the right adviser can open doors, structure the transaction and guide the owner through the process from first approach to delivery.

The EU ETS is an emissions cap-and-trade system that aims to reduce greenhouse gas (GHG) emissions by setting a limit, or cap, on GHG emissions for certain sectors of the economy. The EU Emissions Trading System (EU ETS), established in 2005, was expanded to include maritime transport in 2023 with the new rules taking effect from 1 January 2024. For every ton of reported CO2 emissions, shipping companies operating in the EU must purchase and submit one European Union Allowance (EUA) annually. Operating in the EU is taken to include not only voyages between two EU ports and time spent in an EU port, but also voyages starting or ending at an EU port. Shipping companies must purchase EUAs to cover: • 100% of emissions from voyages starting and ending in EU ports. • 100% of emissions from vessels at berth in EU ports. • 50% of emissions from voyages which start or end in EU ports. EUAs can be bought and sold on exchanges like ICE, EEX, and Nasdaq, or through over-the-counter markets. The required number of EUAs must be bought before a vessel starts a qualifying voyage. Purchased EUAs are recorded for each owner on the EU registry account (a special account for EU ETS participants). At the end of each year shipping companies must surrender the appropriate number of EUAs (based on qualifying emissions in the year) to the appropriate authorities i.e. these are deducted from their registry account. Which vessels are covered under the EU ETS? 1. Commercial Ships of 5,000 gross tonnes or more, transporting cargo or passengers, that call at EU ports, regardless of flag or of the owner’s jurisdiction of incorporation. Offshore ships will be included from 1 January 2027. 2. Ice-Class Ships with ice-class IA, IA Super or equivalent, are granted a dispensation until 31 December 2030 that requires their owners to only surrender a reduced quantity of allowances (5% fewer than their verified emissions). How to account for EUA? •Acquired rights to emit harmful substances (including EUAs) are considered intangible assets. •EUAs should be recorded in the accounting books on the date of acquisition at cost price. •The acquisition date is when emission rights are recorded on the owner’s EU registry account •Subsequentially a shipping company can use either the cost or fair value method to revalue EUA (assets) •In financial statements (balance sheet), EUAs are listed separately under intangible assets, regardless of whether they were acquired for internal use or resale. •Emissions obligations (liability) are recognised when the liability is incurred (i.e. at the time of the voyage/port call giving rise to the liability). •The liability should be revalued at each accounting reference date and/or at the date of settlement Other issues to consider •Exchange and verification of emissions data •Purchasing and recording EUAs for vessels on time charter and settlements in respect of this between the charterer and the owner

The global shipping industry is on course to see its greenhouse gas emissions rise by around a fifth by 2050 if action, including introducing a carbon levy on fuel, is not taken, research by the independent Maersk Mc-Kinney Moller Center for Zero Carbon Shipping shows. With about 90 per cent of world trade transported by sea, global shipping accounts for nearly 3 per cent of the world’s CO2 emissions and the sector is under growing scrutiny to become cleaner. However, the study argues that decarbonisation over the next three decades would in fact be possible if action is taken to ensure that zero and low carbon fuels become economically viable and competitive to fossil fuels, and that this should be done sooner, rather than later. Fuel cost is a major part of total cost of ownership of the shipping operation. Fossil fuels are and will likely remain cheaper than alternative fuels without a carbon levy. Energy efficiency has significant potential to reduce energy consumption Some of the major shipping associations in September proposed creating a global levy on carbon emissions from ships to help speed up the industry’s efforts to go greener and submitted a proposal to the IMO. The Maersk Mc-Kinney Moller Center for Zero Carbon Shipping said such a levy could be introduced initially at as low as USD 50 per T of CO2, with the revenue raised being earmarked for first-movers in the industry to incentivise research and development of alternative fuels. The levy could then be gradually increased to USD 150 towards 2050. This comes as key climate talks are set to begin at the end of this month in Glasgow to tackle global warming under the 2015 Paris Agreement, with fossil fuel in policy-makers' crosshairs. Still, energy transition and peak demand predictions have spooked investors in oil, putting the prospect of peak production sooner than anticipated accompanied by wild price spikes. In the base case scenarios, oil demand is to peak just below 115 Mn bpd in 2030, then it plateaus for less than a decade before starting to decline. Similarly, the IEA expects oil supply to peak slightly above 100 Mn bpd in the 2030s in its most bullish scenario, while in its Announced Pledges Scenario, supply peaks in the 90 Mn bpd levels between 2020 and 2030, well below the 98 Mn bpd peak seen before the Covid-19 pandemic in 2030. Meanwhile, OPEC's annual outlook last month saw global supply nearing a plateau in 2045 but no clear peak. The medium-term erosion of oil demand supposes that renewable energies like electric cars and wind power gain pace, which the International Energy Agency says it needs to pick up fast in order to head off shortages and sky-high energy prices even more severe than the ones currently occurring. This comes as Saudi Arabia's crown prince said on Saturday that the world's top oil exporter aims to reach "net zero" emissions of greenhouse gases, mostly produced by burning fossil fuels, by 2060. However, Crown Prince Mohammed bin Salman also stressed the continued importance of hydrocarbons and said it would continue to ensure oil market stability. While such a statement might appear puzzling and counterintuitive, it is also true that today’s shortages of everything, be it energy, basic commodities and agriculture have, little to do with disruptions driven largely by the Covid-19 pandemic as many seem to imply. Instead, as Jeff Currie, Global Head of Commodities Research at Goldman Sachs said, the roots of today’s commodity crunch can be traced back to the aftermath of the financial crisis and the following decade of falling returns and chronic under-investment in the “old economy” – the economic model prevalent before the “new economy” characterised by central bank quantitative easing programmes to support markets. As infrastructure aged and investment waned, so did the old economy’s ability to supply and deliver the commodities underpinning many finished goods. The severity of these supply constraints has been underlined as countries have moved into recovery mode from the pandemic, exposing just how stretched the old economy has become. The pandemic also had a further effect, placing social needs more at the centre of policymakers’ agendas. Such inclusive growth has only accentuated the demand for physical commodities. And this is where the revenge of the old economy will leave its mark. Periods of commodity price pressure will reoccur as broad-based demand meets inadequate infrastructure. On the current path, if policymakers’ goals of broad-based prosperity and a massive buildout in green infrastructure are to be met, commodity prices can be expected to significantly overshoot to the upside in order to provide the incentive for investment. This is needed to compensate for the growing risks involved in long-cycle capex projects and the inherent complexities surrounding the green energy transition.