According to a contract signed with Islamic Republic of Iran Shipping Line (IRISL), South Korea’s Hyundai Heavy Industries Company, Ltd. (HHI) will build mega-container vessels as well as tankers for carrying petroleum products for Iran, IRNA reported on Friday.

The contracts were the first of their kinds that Iran has signed after the removal of sanctions in January. They were sealed between Hyundai Heavy – the world’s biggest shipbuilder – and the Islamic Republic of Iran Shipping Lines (IRISL) – the biggest shipping company of the Middle East – at a total value of above $600 million, Press TV reported.

The contract is the first of its kind in Iran’s post-sanction era and includes construction of mega-container vessels with 14,500 twenty-foot equivalent units (TEU) capacity and tankers with 49,000 deadweight tonnages (DWT).

The mega-container vessels are to be built in HHI’s yard and the tankers will be constructed in Hyundai Mipo Dockyard Company’s (HMD) yard under International Maritime Organization (IMO) standards and applying Regulations for the Prevention of Air Pollution from Ships (NOX emission limits).

The funding for the orders would be provided by South Korean banks and financial institutions.

A Hyundai Heavy spokesman said on Monday that IRISL was in talks with the ship builder over a 10-ship order, but gave no details, WSJ reported.

The first deliveries are expected in 2018, according to the report.

The ULCVs that have been ordered to be built will be the first of a new generation of vessels that Iran will acquire,” the IRISL announced in a statement. Hyundai Heavy is expected to start delivering the vessels from the second quarter of 2018, IRNA added.

Discussions with the company over IRISL’s vessel orders had started last December.

The contracts were parts of the IRISL’s plans to renovate its fleet through a total investment of $2.5 billion, The Wall Street Journal had earlier reported.

The company operates about 115 oceangoing vessels, but many of the ships are old.

As Iran moves to build modern fleets, its companies have been chartering vessels from Greek and other owners to build market share in container and tanker cargoes.

The Iranian shipping line hopes the container order will give it the necessary capacity to eventually join one of three major shipping alliances that move the vast majority of global containerized cargo, IRISL officials have said.

Annual seaborne trade between Iran and the European Union amounted to $15 billion before the first broad, international sanctions were imposed on the country in 2008. Tehran expects to return to that level by 2020.

The Iranian orders will be a welcome respite for shipbuilders suffering from a virtual halt of new orders as shipping is trying to cope with glut of tonnage in the water estimated at 30% above demand.

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The first South Korean ship will be delivered to Iran in March 2018 based on a deal to buy 10 Ultra Large Container Vessels (ULCV) from the Asian state, announced the managing director of the Islamic Republic of Iran Shipping Lines (IRISL).

Mohammad Saeedi added it is a 14,500 TEU container ship built by South Korea’s Hyundai Heavy Industries Co. (HHI), Tasnim News Agency reported.

He said after receiving the first ship, the remaining ships will be handed over to the IRISL at monthly intervals.

The IRISL signed the deal with the HHI to buy 10 ships from the world’s largest shipbuilding company in December. Financed by South Korean banks, the contract was inked between representatives of the IRISL and the HHI on December 9, 2016.

Under the contract, valued at $650 million, Hyundai will build 14,500 TEU container ships and 50,000 DWT product tankers.

The contracts were parts of the IRISL’s plans to renovate its fleet at a total investment of $2.5 billion.

The company operates about 115 oceangoing vessels, but many of the ships are old and have been deemed unsafe to travel and cannot be insured.

The agreement marks Iran’s first deal with a foreign shipbuilder since the removal of anti-Tehran sanctions.

The sanctions were lifted after Tehran and the P5+1 (Russia, China, the US, Britain, France, and Germany) finalized a lasting nuclear deal on July 14, 2015 and started implementing it on January 16, 2016.

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South Korean shipbuilder Daewoo Shipbuilding and Marine Engineering Co., Ltd. (DSME) and the Industrial Development and Renovation Organization of Iran (IDRO) have signed an outline agreement to cooperate on developing Iran’s shipbuilding industry.

Based on the deal with IDRO, Daewoo shipbuilding will construct a shipyard and related facilities in Iran, according to Yonhap News Agency.

The parties plan to establish a joint venture company (JVC) to develop an Iranian shipyard with cooperation from DSME Okpo Shipyard on the engineering and construction of the types of vessels Iran needed.

The shipyard said that the Iranian side wants financing from the South Korean government in addition to shipbuilding-related technology and operation know-how from Daewoo Shipbuilding.

Daewoo Shipbuilding said the deal will help it make inroads into Iran’s shipbuilding market and export related equipment.

Since 1983, Daewoo Shipbuilding secured a combined $1.65 billion worth of orders to build a total of 38 ships from Iran’s state-run shipping firms, such as National Iranian Tanker Company.

In early December, Hyundai Heavy Industries Co. — a major shipyard in South Korea — announced that it clinched a deal with Iran to supply 10 ships.

Under the expected contract, valued at $650 million, with the Islamic Republic of Iran Shipping Lines (IRISL), Hyundai will build four 14,400 TEU container ships and six 50,000 DWT product tankers.

The ships will be delivered from the third quarter of 2018, it added.

The contract will was Iran’s first deal with a foreign shipbuilder since the lifting of international sanctions on the Middle Eastern nation.

Iran is seeking a series of ship-related contracts via the IRISL to handle increasing trade cargo.

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Alphaliner has listed the Islamic Republic of Iran Shipping Line (IRISL) as the 20th operator among the top 100 container lines, with a total capacity of 99,867 TEUs over 47 ships.

Information from the corporate website indicates tonnage ranging from 1,000 to 6,500 TEUs, but it appears that most of its current fleet is under 5,000 TEUs, according to an article recently published by the American Journal of Transportation.

Negotiations with Hyundai

IRISL’s operating portfolio is modest by today’s standards, but all that is about to change.

On December 9, they reached an agreement with Hyundai Heavy Industries to build 10 ultra large vessels at Hyundai’s Ulsan yards in South Korea. Stretching 2.5 miles along Mipo Bay, Ulsan is the world’s largest shipbuilding operation. When the ‘new build’ frenzy began to cool between 2008 and 2010, shipyards were left holding the bag on unfulfilled orders.

Delivery dates slipped and contract prices were renegotiated leaving shipyards in a slump that continues today.

Hyundai began negotiations on Iranian ships in 2005, but plans were sidetracked as the world’s economy weakened. Finalizing this order will breathe new life into Hyundai.

The Ulsan yard will build six chemical tankers and four ultra large container vessels each at 49,000 DWT with a capacity of 14,500 TEUs. Delivery of the first of these mega container ships is scheduled for 2018. An additional two ULVs may also be in the works upon the completion of the initial order.

The total for tankers and container ships is said to be worth $2.4 billion.

Challenges, opportunities

As a niche player with limited capacity, IRISL had adequately filled the country’s maritime needs and had additional container slots to sell on the open market. Mega vessels will require more aggressive marketing and greater sophistication in handling at load and discharge centers. Some of this expertise will be provided by CMA-CGM that has entered into an operating agreement with the line. This agreement comes on the heels of more open trade, as nuclear sanctions are lifted and world commerce once again flows through Iranian ports.

Several carriers, including Evergreen and MSC, reopened calls to Iran this year with the potential for United Arab and Maersk to enter the market after January. Renewed trade with Europe will commence with the further loosening of sanctions.

IRISL will surely capitalize on their expanding container fleet and slot charter agreements with their carrier partners.

Capital for investment

The United States paid Iran several billion dollars in frozen assets as interest against a failed 1979 arms deal. Payments began after the UN Security Council lifted the nuclear sanctions, which triggered Iran’s maritime development.

As IRISL began to examine options for fleet development and trade expansion, world markets opened up and international partners such as Hyundai and CMA-CGM came on board.

Funding for construction and development of Iran’s maritime interests came along with it.

Ambitious plans

Managing Director of the Iran Shipbuilding and Offshore Industries Complex Company (ISOICO) Hamid Rezaeian-Asl announced an agreement with Hyundai Heavy Industries for financing and technical knowhow at their facility near Bandar Abbas.

Opening in 2006, the ISOICO facility sits on 1,100 hectares of land with a 380-hectare marine basin. Initial projects included design and construction of several passenger liners and feeder-max container ships.

The yard has the capacity to build and repair larger vessels and Hyundai will advance Iran’s ability to produce VLCC and ULCC class container ships.

A bright future

With the infusion of money and expertise from world sources, IRISL has announced plans to become a top 10 ranked Alphaliner carrier by 2020.

China has also been invited to visit the ISOICO shipyard and last year there were even negotiations for the Chinese to build 18,000 TEU ships for the line.

The future of Iran’s maritime interests is extremely bright. Of course, having the money to invest in the expansion of national fleet and shipbuilding facilities is crucial.

The world seems to be at Iran’s doorstep; even the United States did $152.4 million in exports this year.

As IRISL expands port calls to Europe and increases trade routes to Asia and Africa, whether Iranian ships will dock at US ports any time soon remains to be seen.

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A large portion of Iran’s shipping fleet has regained Protection & Indemnity (P&I) insurance from Steamship Mutual.

Jonathan Andrews, Director & Head of Eastern Underwriting in Steamship Mutual, said a considerable number of Iranian vessels have taken out insurance form our company and “we are pleased to observe return of Iranian directors to the board of one of the largest and most diverse P&I Clubs in the world.”

Prior to imposition of sanctions against Iran in 2009, Steamship Mutual, as a leading provider of Protection & Indemnity (P&I) insurance, was the main and most favorable insurer of Iran’s shipping fleet.

IRISL has purchased insurance from Steamship Mutual for container ships and multi-purpose vessels though vessels active in the field of international trade will receive top priority.

Earlier in August, during a visit to Tehran of a Norwegian delegation, a Memorandum of Understanding was inked between Iranian Shipping Lines (IRISL) and the Skuld Marine SKULD P&I Club for shipping insurance cooperation.

By virtue of this MoU, different cooperation grounds between the Islamic Republic of Iran Shipping Lines (IRISL) and the Norwegian SKULD P&I Club including providing different types of maritime insurances, considering and pursuing complaints regarding maritime insurances coverage, training personnel and promoting the knowledge and competency of the Iranian experts were discussed and the respective mutually agreed issues were signed by both parties.

IRISL was the first Iranian shipping line to be affected by Western and European sanctions. Presently, IRISL and the National Iranian Tanker Company (NITC) have resume cooperation with Steamship Mutual international club in a bid to revive previous relations.

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Hyundai Heavy Industries Co. (HHI) received two deals valued at a combined $1.3 billion (1.52 trillion won) at once at the end of the year.

Out of $1.3 billion (1.52 trillion won), it clinched a $700 million (821.1 billion won) order from Iran that marks the Middle Eastern country’s first ship order since international sanctions were lifted early this year, businesskorea.co.kr reported on Monday.

The world’s largest shipyard announced on Sunday that it inked a deal with Iran’s state-owned Islamic Republic of Iran Shipping Lines (IRISL) at the HHI headquarters in Gye-dong, Seoul, on Friday to build four 14,500 twenty-foot equivalent (TEU) containerships and six 49,000 deadweight ton (DWT) tankers for petrochemical products.

The container vessels are to be constructed by HHI, while its affiliate Hyundai Mipo Dockyard Co. will build the petrochemical product carriers.

The ships will be delivered one by one starting the second quarter of 2018. An official from HHI said, “The deal is meaningful as HHI has won its first shipbuilding order and marked its foothold for future business in Iran.”

As economic sanctions were lifted on Iran early this year, the Iranian market is expected to increase orders for vessels to carry abundant resources, such as crude oil and gas, overseas. This is why shipbuilding businesses around the world have an eye on winning shipbuilding contracts in Iran.

With the latest contract, Hyundai Group’s shipbuilding sector, including HHI, Hyundai Mipo Dockyard and Hyundai Samho Heavy Industries, excluding offshore plant, have received a combined order valued at $3.7 billion (4.34 trillion won).

HHI originally set the order target in the shipbuilding sector this year at $15.5 billion (18.18 trillion won) but lowered the figure to $5.6 billion (6.57 trillion won) last month considering its cumulative orders and showings so far.

Contract supported

The administration of Iran’s President Hassan Rouhani has come out in support of a landmark agreement with South Korea’s Hyundai Heavy Industries for the construction of 10 mega-size containers and tankers following criticisms at home that the agreement should have been awarded to local builders.

First Vice President Es’haq Jahangiri said on Monday that the contract with Hyundai Heavy was the renewal of an earlier contract that had originally been signed in 2008.

Jahangiri said Iran had paid the South Korean company up to 25 percent of the value of the contract but further payments had been suspended due to the sanctions imposed on Iran.

“Further payments were not made due to the sanctions and they [Hyundai Heavy] filed a complaint against Iran,” he said at a meeting of directors of Khatam-ul-Anbia Construction Headquarters (KACH) — the construction arm of the Islamic Revolution Guards Corps (IRGC).

“After the removal of the sanctions, some negotiations were carried out [with Hyundai Heavy] and they agreed to implement the agreement and reduce the original fee by 25 percent.”

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Hyundai Heavy Industries Co., a major shipyard in South Korea, looks set to clinch a deal with Iran to supply 10 ships.

Under the expected contract, valued at $650 million, with the Islamic Republic of Iran Shipping Lines (IRISL), Hyundai will build four 14,400 TEU container ships and six 50,000 DWT product tankers, TradeWins, a global shipping news service, reported Saturday.

The ships will be delivered starting in the third quarter of 2018, it added.

If signed, the contract will be Iran’s first deal with a foreign shipbuilder since the lifting of international sanctions on the Middle Eastern nation.

Iran is seeking a series of ship-related contracts via the IRISL to handle increasing trade cargo.

“We are in consultations [with the Iranian side on the possible contract] but it’s not decided yet,” a company official said.

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Head of container affairs of Shahid Rajaei Port in Hormuzgan Province announced on Saturday that 17 international container shipping companies have resumed their activities in the port adding that Maersk Line of Denmark and MOL of Japan as well as CMA of France and Messina of Italy will begin operations in the port soon.

Turaj Amiri further said that given the expected 28 percent rise in operations in the year to mid-March 2017, the port will handle over 2.1 million containers during the period, IRNA reported.

Pointing to the loading and unloading of three million containers per a year during the years before the Western sanctions, the official said the figure dropped to 1.6 million last year.

He put the annual operation capacity for the first phase of Shahid Rajaei’s First Terminal at 1.5 million containers adding that once the second phase of the terminal’s development project becomes operational, the figure will rise to 3.5 million containers.

Pointing to the capacity of the Second Terminal of Shahid Rajaei Port, he said that with the completion of the third phase of development plan, the annual operations capacity for the port will grow to 8 million containers.

“Step by step the problems have been resolved (since then), removing many restrictions and limitations,” Mohammad Saeidi, the chairman of Islamic Republic of Iran Shipping Lines (IRISL) told Reuters in an interview at the Danish Maritime Forum conference in Copenhagen on Thursday.

A slowdown in global trade together with a glut of vessels has left the container shipping industry struggling with its worst ever market conditions, but Saeidi said the post-sanctions environment meant IRISL would be looking to expand its 156-ship fleet.

“We are negotiating with some shipyards and some makers and hopefully it would reach clear conclusions in the next 3-4 months,” he said.

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Container shipping firm Islamic Republic of Iran Shipping Lines (IRISL) expects to have regained by the middle of next year the business lost while Iran was subject to international sanctions, its chairman said on Thursday.

International sanctions were lifted in January following an agreement with world powers on Tehran’s nuclear program.

“Step by step, the problems have been resolved, removing many restrictions and limitations,” Mohammad Saeidi told Reuters in an interview at the Danish Maritime Forum conference in Copenhagen.

“I think at the maximum, by mid-2017 the whole thing will be in the normal manner [of] things.”

He said he hoped to see limitations on dollar transactions removed after next month’s US presidential elections.

“That will be one of the US commitments based on the agreement we signed last January … This is a very certain commitment by the US,” he said.

US banks are forbidden to do business with Iran under domestic sanctions still in force. European banks also face problems, since transactions with Iran in dollars cannot be processed through the US financial system.

A slowdown in global trade together with a glut of vessels has left the container shipping industry struggling with its worst ever market conditions, but Saeidi said the post-sanctions environment meant IRISL would be looking to expand its 156-ship fleet.

IRISL is negotiating with some shipyards and some makers

“We are negotiating with some shipyards and some makers and hopefully it would reach clear conclusions in the next three to four months,” he said.

The downturn in the industry forced one major player – South Korean container line Hanjin Shipping Co. Ltd – out of business in August, leaving an estimated $14 billion of cargo stranded.

Silver lining

Saeidi said Hanjin’s receivership had created “a little bit of a good market” for IRISL, because “now the [Hanjin] customers are approaching us to provide services from South Korea, China to Iran”.

Trade between Iran and Europe will pick up markedly next year, he predicted, with the Islamic Republic exporting petrochemicals while “we need many heavy industry and heavy machinery and power plants and power generation and new technology from the European zone”.

Overall, he saw the future of a difficult market in a positive light.

“We have some challenges. The overcapacity in the market is one of them. The low price and low freights is another… But generally I’m optimistic,” he said.

He declined to comment on whether IRISL would bid for Hanjin assets put up for sale, and said the planned merger of two other container shipping firms, Hapag-Lloyd and UASC, would not add to pressure on volumes in the Middle East.

“They have their own capacity and we have ours. We don’t have any problems with that.”

IRISL was discussing financing with Asian banks but would welcome offers from European ones.

“Before the sanctions we had a good connection with European banks and they financed many projects … After the sanctions there is no sign [of them],” Saeidi said.

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Iran-Daily: Western insurers are slowly reaching deals with Iran as they seek to reenter a multibillion-dollar market 10 months after the lifting of international sanctions in January.

Iran is now in more active talks with insurers to provide cover in a market valued at $9 billion overall last year and potentially double that in the next decade. The country trying to reap the benefits of last year’s nuclear deal with world powers, Reuters wrote on Friday.

Western companies need insurance in order to resume business with Iran. Shipping and trade credit insurance, which remove the risk of nonpayment for goods, are the first types of insurance being offered.

“There is generally a lower degree of fear and apprehension and that is because you have not had the big fines on the insurers that the banks have faced,” said leading London sanctions lawyer Nigel Kushner.

“We are going to see greater and quicker movement there than on the banking side, at least in London and the UK,” said Kushner, who is also a director of the British Iranian Chamber of Commerce.

As Iran has aimed to ramp up oil exports, securing marine insurance has been crucial. Top tier Western ship insurers have started offering services in recent months.

Insurances for Iranian tankers

Iran’s Deputy Oil Minister Amir Hossein Zamaninia has said European insurers now have no problems insuring Iranian oil tankers.

Protection and Indemnity (P&I) clubs – marine insurers owned by shipping firms – have started to provide cover for Iran’s shipping fleet, including its oil tankers.

Jonathan Andrews, director and head of eastern underwriting with Britain’s Steamship Mutual, said it was insuring ships for Iranian tanker operator NITC and also for Iranian cargo ship operator IRISL.

“We have a long history of insuring Iranian ship owners,” Andrews told Reuters. “We are happy to be insuring our former members again.”

Norwegian ship insurer Skuld said it was in discussions with IRISL, while it was already insuring NITC ships.

Others such as the UK’s Standard Club said they were covering vessels trading to and from Iran, but did not say whether this related to Iranian shipping firms.

Ship insurers say there are still constraints on payments, given a freeze on using the US financial system.

“Problems remain however in relation to the channeling of payments through the banking systems, both in relation to collection of premium and settlement of claims,” said Andrew Bardot, executive officer with the International Group, which represents ship insurers.

This was due to the reluctance of many banks and financial institutions to process such payments, and was now the main concern for insurers and reinsurers, he said.

“Solutions are being found, but it is a difficult process and likely to remain so for the foreseeable future.”

More transactions

US banks are forbidden to do business with Iran under domestic sanctions still in force. European banks also face problems, since transactions with Iran in dollars cannot be processed through the US financial system.

Banks remain nervous after some heavy US penalties, including a $9 billion fine on France’s BNP Paribas (BNPP.PA) in 2014, largely for violating US financial sanctions.

Despite this, European export credit agencies are guaranteeing trade finance for Western companies doing business with Iran.

Germany’s state-run export credit group Hermes has concluded trade finance deals covering goods worth several million euros.

“About a dozen transactions have been approved so far,” a Hermes spokesman said.

“The demand is there from the exporters’ side but they need a lot of information. There is a continuous and rising flow of applications (for export credit guarantees).”

Italian export credit agency SACE has also undertaken its first small transactions with Iran.

“The lingering risks should not be underestimated, however, as they might create problems … legal, documentary, operational, for companies interested in building or restoring commercial or financial relationships with local counterparties,” a SACE spokesman said.

France’s Coface has signed an agreement with Iran to guarantee trade finance on behalf of the French government.

France’s Coface has signed an agreement with Iran to guarantee trade finance on behalf of the French government. Nevertheless, major transactions were yet to be concluded due to the banking issues.

Aviation and energy are two sectors in focus, industry executives say, along with political risk cover, even if there have been few deals so far.

Christian Bieri, EMEA reinsurance head at insurance group MS Amlin, said Iran was “very much under discussion”.

“It’s very high up the agenda,” Bieri said. “It’s going to be something for 2017.”

Other large insurers and reinsurers such as Hannover Re (HNRGn.DE) are looking closely at Iran, but say concerns about payments still prevent them from doing business there.

Swiss Re (SRENH.S) chief executive Christian Mumenthaler told Reuters: “We have big business in the US and so our chief legal officer is basically regulating every micro-step we do in that direction.”

Lloyd’s of London had historically been active in Iran and chairman John Nelson said it was a “market we would like to get back into”.

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