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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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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