South Korea’s Pan Ocean Co. won a $636 million contract with Fibria Celulose SA, the world’s largest pulp producer, to ship pulp over 15 years starting 2019, its first long-term deal struck this year. The deal accounts for 39.55 percent of its total revenue in 2015.

Pan Ocean said in a regulatory filing on Tuesday that under the deal, it will carry eucalyptus pulp to Fibra from 2019 to 2035. There is an option for Fibria to extend the period up to 25 years.

South Korea’s Pan Ocean wins $636mln contract with Brazil’s Fibria to ship pulp over 15 years starting 2019

Image courtesy of Pan Ocean

For the deal, Pan Ocean has made an order to construct five open hatch type bulk carriers at a total price of $146 million. The vessels will be delivered one by one starting December 31, 2018 until September 11, 2020.

The Korean shipper will be transporting around total 30 million tons of wood pulp to Fibria over the 15 years. In annual terms, the capacity would reach about 2 million tons.

If Fibria extends the delivery period to 25 years, Pan Ocean’s total revenue would exceed 1 trillion won.

Pan Ocean that is currently operating five carriers is expected to deploy as many as 10 wood pulp carriers at sea by 2020, which would allow it to have a cargo capacity of 70 million tons, or 4 million tons per year, and reap stable profits.

A Pan Ocean official said the shipper is pursuing long-term transportation contract as a source of steady profits.

He added Pan Ocean, which was acquired by Harim Corp. in 2015 after struggling under court receivership, saw its operation back on track and hoped it to recover to the level last seen before court receivership should circumstances improve.

Pan Ocean stocks ended Tuesday at 5,170 won, up 7.48 percent from the previous session in Seoul trading.

Source: Pulse