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2013-07-08 09:42:50

Shipyards all over the world are struggling as contracting volumes and prices have dropped in recent years, and Chinese yards are no exception. Since China’s yards have historically been highly dependent on building bulkers, efforts by some yards to survive in the current market are focusing on trying to diversify their product mix.

Orderbook Pressure
As shown on the Graph of the Month, the total orderbook at Chinese yards has shrunk notably in recent years, standing at 1,933 vessels of 111m dwt at the start of 2013, down 50% in terms of dwt since the start of 2009. This decrease is due to the surge in deliveries and the recent drop in contracting. In 2007, over 2,000 orders of a total 106m dwt were placed at Chinese yards, falling to 31m dwt in 2009. While contracting picked up slightly in 2010, it has since continued to fall, and in 2012 orders for only 451 vessels of 19m dwt were placed, the lowest level since 2002.
Since bulkers have previously accounted for the majority of contracts at Chinese yards (74% in 2007-11 in terms of dwt), the considerable drop in bulkcarrier newbuilding orders in recent years has had a particularly negative effect on Chinese yards.

Domestic Owners Branch Out
Since the onset of the recession, the contracting patterns of domestic and international owners have diverged. The share of bulkcarriers in contracts placed at Chinese yards by international owners has remained relatively stable at fairly high levels of over 60% in terms of dwt. Meanwhile, the share of bulkers in domestically owned contracts has dropped significantly, from 84% in 2010 to 30% in the year to date.
A large part of this drop is due to the increased share of tanker contracts. Orders for tankers have risen so far this year to 2.9m dwt, up 42% on domestic tanker contracts in full year 2012. This is largely due to China’s oil security strategy, which aims to up the proportion of imports carried by Chinese-flagged tonnage to 60%. This has led to 13 VLCCs being ordered by domestic owners at Chinese yards in the last year.
Domestic owners have also diversified into a range of other more specialised vessel types. In terms of contract value, orders for vessels other than tankers and bulkers accounted for an estimated 61% of domestic orders at Chinese yards last year. While international owners have also invested an increasing amount in offshore units at Chinese yards in recent years, contracting levels for other specialised vessel types by international owners remain relatively low, with many Chinese yards yet to fully develop the necessary experience and international reputation for building such complex vessels.

Still Some Way to Go
The Chinese government is keen to address these issues, and has been actively encouraging contracts of non-bulker vessels. Yet generally low newbuilding interest in many sectors is still creating difficulties for yards. While current contracting volumes are still fairly low, the continued diversification of both Chinese owners and yards into more specialised markets will increase their experience and thus could eventually bring about some new opportunities for both.

2013-06-07 10:35:49

In the first five months of this year, Chinese shipyards win more newbuilding orders than their opponents in S.Korean.
According to Clarkson, Chinese yards secured 271 vessels of 5.32m CGT with a total value of $7.7bn while S.Korea inked 162 vessels of 5.23m CGT in the period. However, S.Korea still exceeded China in total value by winning orders worth $12.8bn.
In May, S.Korean shipyards got new orders of 25 vessels, 810K CGT and $1.3bn. In the same period, Chinese builders penned 58 vessels of 1.23m CGT with a value of $1.1bn.
In last month, Japanese shipyards wins 14 vessels of 290K CGT ($452.0m) and totally 73 vessels of 1.68m CGT ($3.0bn) in the first five months.

2013-05-30 17:16:08

Japanese shipbuilding industry officials recently said that Japanese shipyards has received new orders at a level almost the same with booming period. At the same time, Korean shipyards successively Schriever high-tech and high-value-added orders as well as offshore orders. Both S.Korea and Japan has find the way to keep their competitiveness in the market downturn by strengthening their innovation capacity.

It is reported that key shipbuilders in Japan and S.Korean have their own research units to track and develop most advance ship technology globally. Even in the market trough, they never suspended investment in the R&D. For example, in the downturn of 2010, the investment in ship technology research and development still accounted for over 15% of the annual expenditure of the six main shipyards in Korean, which gained shipowners acknowledge-ment. Innovation decides how far the shipyard can go, as an industry expert put it.

Zhang Guangqin, director of CANSI says that order is the eternal theme for shipyards survival. Chinas shipowners pay more attention to eco-designed and low-cost ships in compliance with emerging new regulations. In the tense circumstances, shipyards have to enhance innovation capacity to develop new marketable ship types.

Many small and medium shipyards choose to develop special ship to avoid the fierce competition with bigger players. Diversifies competition - to develop chemical tanker, exploration vessels, containerships and other high-tech and high-value-added ships is another way for shipyards in the overall overcapacity market.

Besides, Zhang also says that shipyards should put priority on technology negotiation instead of  quotation and business negotiation. Quotation should be made after the technical specifications be fully understood.

2013-05-30 13:57:13

Chinese shipbuilding companies have seen a surge in orders for the first four months of this year, with new orders standing at 11.57m dwt, an increase 57% year-on-year, according to the statistics released by the China Association of the Naional Shipbuilding Industry (CANSI).
"New orders increased compared with last year, it is still too early to conclude that the shipping industry is well on track for sustained recovery," Nie Lijuan, deputy secretary-general of CANSI told local media.
However, the total profit of China's 80 major shipbuilders stood at RMB2.1bn for the same period, down 56.7% from the previous year.

2013-05-27 09:33:40

Chinese shipyards have powered ahead and now produce more ships than anybody else, but the business of shipbuilding is becoming increasingly difficult and profits harder to come by.
Although still major players and the world's biggest tanker producers, South Korean mega-yards no longer dominate every sector of the market. China is making more bulk carriers than any other ship producer in the world and Japan is also making a comeback, partly spurred by a lower yen, which makes it an attractive market for ship buyers.
"Who still leads the pack? Well, it's China," says Martin Rowe, managing director of Clarkson Asia Ltd.
China's output of ships in 2012 was close to 20 million compensated gross tons, an indicator of the amount of work that goes into building a ship.
The nation's shipbuilding industry is extremely diversified, with 153 shipyards in operation.
In South Korea, the No 2 player, production is concentrated in just four or five "super-yards" that dominate the industry.
But the business of shipbuilding is changing rapidly, along with a shipping industry that has gone from massive boom to historic bust in less than half a decade. Through 2012, around 220 yards around the world were taking orders for ships, each holding at least one contract, less than half the number in 2007 or 2008.
"A vast number of yards, particularly in China, have either been mothballed, keeping the facilities running without producing anything, or have gone into liquidation," says Rowe.
The boom days of 2008 and 2009, when new-ship orders skyrocketed, have come and gone. Although the number of ships ordered around the world in the first couple of months of this year was surprisingly high for an industry trying to deal with overcapacity, the orders were anything but uniform.
The top yard in China by order book is Jiangsu Rongsheng Heavy Industries Co, which builds bulk carriers, ore carriers, oil tankers, and a variety of other vessels. Despite the country's position as the world's leading shipbuilder, the company has faced difficult times during the last year. In 2012, revenue at its Hong Kong listed arm in 2012 dropped to half of the 2011 figure, and the company posted a net loss for the year.
High fuel costs, environmental concerns and regulations mean that shipyards have to be creative. Many build ships at a loss today.
Financing is another issue because money for ships has dried up, with banks less willing to invest given the state of the industry. In 2005, the charter rate of some ships amounted to about three times the cost of the fuel. Today, the cost of fuel can be double the time-charter price of a ship, a result of increases in the cost of fuel and massive declines in shipping rates.
The price of a barrel of oil is now more than 40 percent higher than in 2005, while shipping rates have plummeted in the past three years to levels last seen in 1997. A Capesize vessel - a designation for ships too large to use the Suez canal and which therefore have to round the Cape of Good Hope or Cape Horn - that would have fetched an average rate of $35,300 (27,477 euros) through 2009, fetched $11,700 last year.
And a slew of new factors are likely to come into play to make things even more difficult. These include a series of new regulations, mostly environmental, that will kick in through 2025.
The good news for shipbuilders is that turnover is rising. A ship's traditional 25-year lifespan, or number of years in use, is being reduced by roughly 10 years in some cases, as owners try to economize and add newer and more efficient ships to their fleets.

2013-05-20 09:58:11

Chinese shipyards have powered ahead and now produce more ships than anybody else, but the business of shipbuilding is becoming increasingly difficult and profits harder to come by.
Although still major players and the world's biggest tanker producers, South Korean mega-yards no longer dominate every sector of the market. China is making more bulk carriers than any other ship producer in the world and Japan is also making a comeback, partly spurred by a lower yen, which makes it an attractive market for ship buyers.
"Who still leads the pack? Well, it's China," said Martin Rowe, managing director of Clarkson Asia Ltd.
China's output of ships in 2012 was close to 20 million compensated gross tons, an indicator of the amount of work that goes into building a ship.
The nation's shipbuilding industry is extremely diversified, with 153 shipyards in operation.
In South Korea, No 2 player, production is concentrated in just four or five "super-yards" that dominate the industry.
But the business of shipbuilding is changing rapidly, along with a shipping industry that has gone from massive boom to historic bust in less than half a decade. Through 2012, around 220 yards around the world were taking orders for ships, each holding at least one contract, less than half the number in 2007 or 2008.
"A vast number of yards, particularly in China, have either been mothballed, keeping the facilities running without producing anything, or have gone into liquidation," said Rowe.
The boom days of 2008 and 2009, when new-ship orders skyrocketed, have come and gone. Although the number of ships ordered around the world in the first couple of months of this year was surprisingly high for an industry trying to deal with overcapacity, the orders were anything but uniform.
The top yard in China by order book is Jiangsu Rongsheng Heavy Industries Co, which builds bulk carriers, ore carriers, oil tankers, and a variety of other vessels. Despite the country's position as the world's leading shipbuilder, the company has faced difficult times during the last year. In 2012, revenue at its Hong Kong listed arm in 2012 dropped to half of the 2011 figure, and the company posted a net loss for the year.
High fuel costs, environmental concerns and regulations mean that shipyards have to be creative. Many build ships at a loss today.
Financing is another issue because money for ships has dried up, with banks less willing to invest given the state of the industry. In 2005, the charter rate of some ships amounted to about three times the cost of the fuel. Today, the cost of fuel can be double the time-charter price of a ship, a result of increases in the cost of fuel and massive declines in shipping rates.
The price of a barrel of oil is now more than 40 percent higher than in 2005, while shipping rates have plummeted in the past three years to levels last seen in 1997. A Capesize vessel - a designation for ships too large to use the Suez canal and which therefore have to round the Cape of Good Hope or Cape Horn - that would have fetched an average rate of $35,300 through 2009, fetched $11,700 last year.
And a slew of new factors are likely to come into play to make things even more difficult. These include a series of new regulations, mostly environmental, that will kick in through 2025.
The good news for shipbuilders is that turnover is rising. A ship's traditional 25-year lifespan, or number of years in use, is being reduced by roughly 10 years in some cases, as owners try to economize and add newer and more efficient ships to their fleets.

2013-04-26 09:56:13

The nation's shipbuilders received 9.57 million deadweight tonnage of new orders in the first quarter of the year, a 71.1 percent surge on last year, but analysts still expect vessel prices to remain low because of newly added capacity.
The first quarter figures compare to 5.59 million DWT in the same period last year, according to the China Association of the National Shipbuilding Industry.
The rising new order book is in line with global industry trends, which show that shipbuilding orders grew 44 percent from a year ago to 20.58 million DWT for the quarter.
Industry analysts believe the global shipping industry has bottomed out and expect to see a pick up in fortunes next year and in 2015.
"In a slow market, shipping companies place more orders due to lower prices, and it usually takes nearly two years to complete a shipbuilding order," said Meng Lingru, an industrial analyst with Shanxi Securities.
Despite the pickup in new orders in China, completed orders during the quarter dropped 15.6 percent year-on-year to 9.45 million DWT, and total ongoing order weight dropped to 107 million DWT from 141.94 million of 2012, a decline of 24.6 percent year-on-year.
Li Xiaoguang, an industrial analyst with Shenyin Wanguo Securities, said in a research note that the figures showed the shipbuilding industry is consolidating, and is still at the bottom of its cycle.
Completed orders, newly received orders, and total ongoing orders are the key indicators for the shipbuilding industry.
"Although global orders did not reach the 26.33 million DWT they did in 2011, the 44 percent increase marks an improved situation for the global market this year," said the Shenyin Wanguo report.
Shipbuilding costs have halved over the past two years, and many lower-tier yards in China are struggling to break even.
Without a recovery in process, the industry is unlikely to enjoy any actual recovery, added an analyst from Xiangcai Securities, who spoke on condition of anonymity.
China CSSC Holding Ltd, the Shanghai-listed arm of the country's largest shipbuilder China State Shipbuilding Corp, revealed in its annual report that it had posted a 26.87 million yuan ($4.35 million) net profit for the 2012 fiscal year, a 98.81 percent slump on 2011.
Similarly, Guangzhou Shipyard International Co Ltd's net profits tumbled 98 percent to 10.33 million yuan.
Data from the Ministry of Industry and Information Technology showed Chinese shipbuilders completed 21.4 percent fewer orders in 2012 from the year before, and newly received orders dropped 43.6 percent year-on-year.
In addition, total ongoing orders fell 28.7 percent.
"The shipbuilding industry is closely linked to world trade and shipping activities.
"Therefore, if the downstream industries are not rallying, we won't expect any immediate recovery in the shipbuilding industry," added Meng.
Since the fourth quarter of 2011, the China Shipping Prosperity Index has stayed below the demarcation line for six consecutive quarters, indicating the overall outlook for the shipping industry is turning from bad to worse, according to the latest China Shipping Prosperity Report issued by Shanghai International Shipping Institute.

2013-03-26 15:44:59

New order contracted in January and February 2013 in Chinese shipbuilding industry showed a small increase comparing with the same time period last year, however, delivery is reported to have sharply declined and industry’s total production value and ship exports also decreased that production management appears to get worse.
According to data from China Association of the National Shipbuilding Industry (CANSI), China’s ship delivery during the period from January to February 2013 was reported to be a combined 5.69m dwt, a 20.9% fall against the same time period of 2012, and new orders contracted amounted to 5.03m dwt, showing a 1.9% rise. Furthermore, an orderbook as of the end of February was seen as 106.29m dwt which represents a 27.4% decrease against the same time period last year and 0.6% decline from the end of 2012.
During the same period, China’s 1,648 companies in shipbuilding and related industries over a certain size are said to have CNY 102.9bn ($16.5bn) worth of total production value of completed products, showing a 4.9% decrease against the same time period of last year, and of which, shipbuilding industry saw a 10.4% decrease with CNY 70.2bn and ship equipment industry had CNY 15.6bn, a 6,5% rise. Moreover, ship repair industry saw a 9.7% decrease to CNY 5.8bn.
During the same period, total export value of them dropped by 25.2% year-on-year to CNY 28.6bn - of them, shipbuilders down by 28% to CNY 22.3bn, ship equipment makers increased by 4.5% to CNY 1.2bn and ship repairer declined by 24.9% to CNY 2.7bn.
During January-February period, Chinese shipbuilding industry’s delivery of export ships was reported to have decreased by 21.5% y-o-y to 4.92m dwt and won orders from foreign shipowners of a combined 3.9m dwt, a 1.8% increase. Also, the orderbook for export as of February was said to be a combined 90.87m dwt, a 25.9% decrease.
Ships for export are said to have accounted for 86.5%, 77.6% and 85.5% in China’s total delivery, new orders and orderbook, respectively.

2013-03-22 11:12:25

The continued shipbuilding downturn has made Chinese shipyards desperate to get new orders. Gao Yanming, chairman of Hebei Ocean Shipping Co (HOSCO), warns the shipyards not to receive low-price ship orders blindly.
“Currently the newbuild price remains at a very low level and some newbuild prices are even lower than shipbuilding costs,” Gao said. “In this case, shipyards should remain rational and carefully calculate the cost and estimate the market trends, otherwise the orders may bring even more troubles for the shipyards.”
Gao also predicts the newbuild price will gradually go back to a reasonable level as economies in many countries and regions are starting to revive which will increase the international trade volume, meanwhile, more shipowners have started to recycle old vessels to optimise their fleet. “Besides, the steel price and labour costs are all appearing to be on an upward trend which will also increase the newbuild price,” Gao reckoned.

2013-03-15 13:31:26

Chinese shipbuilding industry having been stagnant recently is prospected to have not so bright future.
Zhou An, member of Chinese People’s Party Consultative Congress, has told through an interview with a local newspaper that there is little possibility to see a great improvement for the next two to three years, pointing out a recession that Chinese shipbuilding industry has been going through now.
According to data from China Association of National Ship Industry (CANSI), newbuilding deliveries of Chinese shipbuilding industry in 2012 were a total of 60.21mDWT with a 21.4% decrease compared to same time period last year while newbuilding contracts were reported to be a combined of 20.41mDWT, down by 43.6% against the same period last year, with an orderbook standing at 106.95mDWT as of the end of last December, down by 28.7% from the previous year.
Moreover, CANSI prospected that major economic indicators in Chinese shipbuilding industry are likely to be on a downturn in 2013 due to a decrease in orderbook and an increase in production cost. Furthermore, vessels of a combined of 55mDWT are to be constructed this year with a slight increase in new contracts, yet orderbook is anticipated to be lower than 100mDWT.
Zhou An pointed out the reason behind the slump as a protracted economic slump in Europe and America and some European countries having a debt crisis. However, seen from another perspective, it is anticipated to see a situation improving little by little since there are still demands in the market.

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