chinese shipyard
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2012-08-27 09:42:27

The recent contracting shortage has led to fears that yards may soon struggle to fill available capacity. Nowhere is this problem starker than amongst the 122 medium and small Chinese local yards (MSL yards, defined here as all private yards bar the 20 largest when sorted by 2011 output). This has led to speculation that some yards may either go out of business or have to merge with others to survive.
Rapid Growth
During the shipbuilding boom, the capacity at Chinese MSL yards expanded quickly. As shown by the Graph of the Month, they took 4-5 times their existing capacity in new orders in 2006 and 2007. This led to rapid growth in deliveries. In 2004, Chinese MSL yards output vessels of 0.7m CGT, rising to 3.9m CGT in 2011, or 20% of total Chinese output. However, MSL yards have suffered from a sharp fall in the number of contracts they have taken in the past 18 months. In 2012 so far, MSL yards have received orders of 0.42m CGT, equating to just 19% of the deliveries they have made in the same period.
Survival Difficulties?
Much of this is because smaller Chinese yards are heavily reliant on winning contracts for tankers and bulkers, as shown by the fact that these types account for 63% of year-to-date MSL deliveries (in CGT). There has been limited contracting in these sectors recently, despite relatively low newbuilding prices. Unlike their larger counterparts, smaller yards tend to be less able to stimulate new business by offering generous financing packages or loss-making deals to owners. A lack of direct state support, combined with the increased difficulty in gaining finance, will constrain yards further. This is particularly the case in light of recent comments by the China Banking Regulatory Commission regarding the need to limit loans to industries with excess capacity. This will make it hard for local yards to spend funds either on developing new fuel-efficient designs or diversifying their product mix.
Diversification Matters
Based on the current orderbook, projected deliveries by medium and small local yards will decline in 2013 and 2014. Their share of total Chinese output is also projected to fall to 6% by 2014. Just 25 of the 122 MSL yards have vessels on order for delivery beyond 2013. Therefore, it seems realistic that some yards may close. Already small yards like Bluesky and Jingang have filed for bankruptcy, whilst shipbuilding operations at China Dongfang have been suspended.
Despite this, many MSL yards may survive by building non-commercial vessels, such as fishing boats or yachts. Additionally, some yards have begun to take on ship repair (e.g. Dalian Lushun) or demolition work instead. This willingness to adapt makes mass closures of MSL yards seem less likely. Then again, even if all of these smaller Chinese yards were to shut, this would lead to the loss of 20% of Chinese shipbuilding capacity, even though 75% of Chinese yards are classed as MSL yards. This represents 8% of global yard capacity. So, any closures would help ease likely shipbuilding overcapacity in the coming years, but would not be a quick and total solution to this global issue.

2012-08-24 09:36:15

Chinese shipbuilders logged higher margins in the second quarter of this year than their South Korean rivals, as they built higher-priced ships ordered before the 2009 financial crisis, a report said Thursday.
Daishin Securities Co. estimated in the report that the operating income margins for Chinese shipbuilders ranged from 1.4 percent to 28.5 percent during the April-June period, while South Korean shipbuilders saw their margins for the same period stay in a 2.1-10.4 percent range.
Yangzijiang Shipbuilding Ltd., based in China's eastern coastal province of Jiangsu, recorded the highest operating margin of 28.5 percent, as 70 percent of its orders were won before the end of 2009, it said.
In South Korea, Hyundai Heavy Industries Co. was the most profitable with a 10.4 percent margin, followed by Samsung Heavy Industries Co. with 9.1 percent.
The trend is expected to continue through this year but South Korean shipbuilders are forecast to overtake their Chinese rivals in terms of operating income margin starting in 2013, when South Korean shipyards are expected to clinch orders for high-margin, high-tech ships such as liquefied natural gas (LNG) carriers, floating and production, storage and offloading (FPSO) vessels.
In the first half of this year, South Korea's shipbuilders led the global market in the number of new orders, despite a large drop in shipbuilding orders caused by sluggish economic conditions.
South Korea won orders for 3.31 million compensated gross tons (CGTs) during the cited period. The figure represents less than half of the 8.92 million CGTs the country acquired during the same period last year, but accounts for a large share of total orders placed globally, capturing 37.7 percent during the cited period.
China came second, with its global market share rising slightly from 32.1 percent in 2011 to 34.5 percent in the first half.
However, the gap between South Korea and China widened significantly when measured in the value of their orders, as South Korean shipyards won deals valued at US$14 billion while Chinese rivals' orders, totaling 3.03 million CGTs, are worth only $5.9 billion, according to the South Korean Ministry of Knowledge Economy earlier.

2012-08-21 09:56:17

The specters of the global financial crisis and the European debt crisis still haunt shipbuilders in the Yangtze River Delta region, who have had no respite from economic choppiness since 2008.
According to the Ministry of Industry and Information Technology, Chinese shipbuilding companies received a total order of new ships amounting to some 10.74 million dead weight tons (DWT) in the first half of this year, down by 50.3 percent year-on-year.
The volume of handling orders was a mere 125.87 million DWT by the end of June, down 30.7 percent year-on-year, which can easily lead to the assumption that some shipbuilders will not be able to keep operating in the following months.
"We have not received any new orders. If the situation continues, we will have only one ship to build in the second half of this year," says Pan Haiwei, general manager of Wu Zhou Shipbuilding Industry Co Ltd in central Zhejiang.
The situation at Yueqing Jiangnan Shipbuilding Co Ltd of Wenzhou is even worse. Chairman Hu Guoqiang says no new orders have been received this year and the company now has no ships to build.
"What's worse, there are still several bulk carriers pending a sale. We are still trying our best to seek a buyer," Hu says.
Shipbuilders in neighboring Jiangsu province are also barely staying afloat.
Zhang Yuyong, executive deputy general manager of New Century Shipbuilding Corp in central Jiangsu, says the company had also not received any orders by August.
"The orders we are handling now will be completed by April or May next year. But my prediction is that the shipbuilding market will not pick up until 2015," Zhang says.
"Meanwhile, the profits of shipbuilding are much reduced. An 80,000-ton bulk carrier, for example, was priced at $34 million (28 million euros) in 2010, but the price now is merely $23 million. That 30-percent profit is almost gone now," he says.
"Of course there are shipbuilders fighting for orders. But the profits are so small that it is like chewing bones for us. Private shipbuilding companies that have found trouble keeping their cash flow healthy definitely desire new orders. But for us, a private company that has been in operation for more than 10 years, we can make it even if we are out of any new orders."
New Century is taking a different approach to other shipbuilders; it is using this period to concentrate on new product research and development. One of their aims is to reduce energy use. A reduction in daily energy use from the current 130 tons to 60 tons would directly profit the company, Zhang says.
Although New Century is able to weather this difficult period with its previous years' earnings, it is still investing in property and giving out small loans to make more profits.
While shipbuilding companies have been having an extremely hard time since 2008, companies working on ocean-engineering projects have been doing well.
"The orders our company received in the first half of the year have risen significantly, especially for oil-extraction machines, largely due to the huge global demand for energy," says Liu Yufeng, deputy director of Wartsila China.
The Helsinki-headquartered company manufactures power sources for one in every three ships, and services one in two ships, sailing the world's seas.
"Many private companies have also marched into the ocean-engineering industry, for the oil and natural gas markets have been positive. For the low-end shipbuilding companies, the historic low in the shipping market will pose much threat to them. But for companies specializing in high-end ocean engineering, the lull means nothing," he says.

2012-08-20 15:10:44

China's order intake could be lower than Japan's in 2012.
Sources in Japan said that in 2011, China's order intake took 29.2% of global orders, lower than Korea's 47.2%. Also, Chinese shipyards have contracted overall 10.74m dwt during the first six months of this year, down by 50.3% year-on-year.
An industry player predicted that Chinese shipbuilding industries' 2012 new order would be lower than Japanese' order intake and be down to world's third place.
Another official revealed that among around 1,600-some shipyards in China, about one third of them are going through management crisis and will inevitably face restructuring.
China has been aggressively involved in newbuilding sales with lower labor costs, but from 2010, over-supply issue emerged. Moreover, amid Eurozone crisis and new order drought, some forecast that not a few Chinese shipyards would soon go into bankruptcy.

2012-08-13 09:27:39

What is becoming evident in the shipbuilding crisis affecting China is that the years of the greenfield, private upstarts have come to a crashing end. Going forward China’s yards landscape will be dominated once again by the state run giants, CSIC and CSSC with a handful of leading, pragmatic private yards also in the mix. Yards with onerous debts in 2012 will find in it impossible to endure the order drought of the coming three years. The massive slimming of China’s bloated shipbuilding sector will lead to less than 50 shipyards exporting ocean going ships by the end of 2015, according to SinoShip analysis. The ability to meet owners’ more specific demands in the downturn, rather than merely offering standard designs, will be vital. Yards without a very significant spending on r&d will fall by the wayside.  Check out the forthcoming Issue 3 of SinoShip magazine for more on the winners and losers in China’s shipbuilding sector.

2012-08-09 09:40:22

As many as 60 liquefied natural gas carriers could be ordered at China’s yards over the next three years, as the country boosts its LNG imports and continues its policy of using its own ships.
The prospect of China using vessels built, owned and flagged in China for its LNG imports does not bode well for shipowners in the world, therefore, they should look to opportunities presented by emerging LNG importers in Southeast Asia, such as Thailand, Indonesia and Malaysia, say analysts.
Analysts say expensive Australian LNG will prompt China to import more cargoes from further away — from the Middle East, West Africa and maybe the US — creating the need for this many vessels.
There are five Chinese-built LNG carriers, all of which were built at Hudong-Zhongua shipyard in Shanghai.
The yard has five more LNG vessels on its orderbook - one on sea trials prior to delivery and the other four being built for Japan’s Mitsui OSK Line.

2012-08-06 11:17:10

China’s first half shipyard figures make grim reading and the national shipbuilding association warns there is no help in sight from Beijing.
In the first half, newly received order volume in China is 10.74m tons, sharply down 50.3% year-on-year. Till the end of June 2012, orders on hand stood at 125.87m tons, a decrease of 30.7% year-on year. The equipment division of the Ministry of Industry and Information estimated many yards may will run out of work during the second half of 2012.
“The shipbuilding industry is getting worse. Beijing has not released any new specific supporting measures for the industry yet,” an official from the national shipbuilding association told SinoShip News.
Despite fevered speculation Beijing has yet to announce any stimulus measures to combat a slowdown in the economy. 

2012-08-01 14:33:42

China shipyards falter as glut triggers 49 per cent slump in orders, Bloomberg reports
The glut has pushed new vessel prices to eight-year lows and caused a 49 per cent plunge in first-half orders at the nation’s more than 1,500 shipbuilders. It’s also tipped smaller yards into bankruptcy and hit earnings at larger players.
“It is a pretty depressing environment,” said Ajay Mirchandani, a Singapore-based JPMorgan Chase & Co. analyst. “You just have too many yards and too few orders, which is hurting pricing and profitability.”
Orders have tumbled as a global excess of commodity, oil and container ships has damped cargo rates and deterred owners from ordering more vessels. China Rongsheng Heavy Industries Group Holdings, the nation’s biggest shipbuilder outside state control, hasn’t announced any vessel contracts this year, while Yangzijiang Shipbuilding Holdings’ backlog shrank 27 per cent in the year ended March because of the slowdown.
“It might take two to three years before the situation improves,” said Zhang Yao, Yangzijiang’s investor relations spokesman. “There’s definitely an adverse impact on our profits.”

Profit Slump
Guangzhou Shipyard International’s first-half profit probably fell more than 50 per cent, partly because the price of under-construction vessels “dropped sharply” from a year earlier, the company said last week.
The shipbuilder dropped 0.6 per cent to HK$4.77 at close of trading in Hong Kong. It’s fallen 55 per cent in the past year, while Rongsheng Heavy has plunged 72 per cent. In Singapore, Yangzijiang has slumped 31 per cent and Cosco Corp. Singapore Ltd. (COS) has tumbled 48 per cent.
“Until we have some clarity in the world economy, we won’t see any price recovery,” Rongsheng Heavy said in an e-mailed reply to Bloomberg News questions. World trade has been “negatively affected” by the global uncertainty caused by the European debt crisis, the Shanghai-based shipyard said. It declined to comment on orders this year.
The order slump has caused Chinese shipbuilders’ backlog to fall 24 per cent this year and pushed a monthly index of new-ship prices compiled by shipbroker Clarkson to the lowest since March 2004. Yangzijiang held orders for 96 ships at the end of March, compared with 131 a year earlier. It won seven orders in the first quarter.
China has 1,536 shipyards with annual sales of more than 5 million yuan (USD780,000), according to the China Association of the National Shipbuilding Industry.

Capacity Surge
Shipbuilding and shipping capacity surged because of speculation fueled by China’s demand for raw materials. The government also provided low-cost financing for new vessels to help support shipyards.
That combination contributed to a global surge in orders from about 2007, including for dry-bulk ships, used to haul iron ore and coal. These vessels and cooling demand are now hammering charter rates. The benchmark Baltic Dry Index (BDIY) has dropped 26 per cent in the past year to 958 yesterday. It reached a high of 11,793 in May 2008.
Among capesize ships, the largest vessels tracked by the index, the global fleet has about doubled in five years to 1,464 at the start of the month, according to Clarkson. Three-year charter rates have tumbled to around USD10,000 a day from about USD55,000 five years ago, according to the London-based shipbroker.

Capesize Slump
The slump has caused orders for new capesize ships to plunge. Worldwide, 12 capesizes were ordered in the first half, compared with 71 for the whole of 2011. Prices have slumped to USD46.5 million as of June, 14 per cent less than a year ago and 50 per cent down from the end of 2007, according to Clarkson data. Panamax prices have plunged 19 per cent in the past year, while prices for 4,800-box container ships have tumbled 19 per cent.
Worldwide orders for dry-bulk vessels dropped 49 per cent to 9.8 million deadweight tons in the first half, according to Clarkson. Orders for all ship types fell 46 per cent to 20.9 million deadweight tons, it said. Chinese shipyards won orders totaling 8.5 million deadweight tons in the period.
Chinese shipbuilders have been more affected by the orders slump than yards in South Korea, home to the world’s biggest shipbuilders, because of their greater reliance on dry-bulk vessels. South Korean yards including Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering have benefited from demand for energy equipment such as offshore units and drill ships, which are more complicated to build and offer higher margins.

Unprofitable Orders
The drop in prices means that new orders are rarely profitable for Chinese shipbuilders, particularly for smaller ones, said UOB Kay Hian Holdings analyst Lawrence Li. Yards are also offering more generous payment terms, such as lower down payments, which is increasing financing costs, he said.
“The shipyards don’t have bargaining power,” Shanghai- based Li said. “Demand is really weak.” Prices are unlikely to rise more than 5 per cent by the end of next year, he said.
Shipyard failures may help revive prices by paring competition. About half of Chinese shipbuilders may close within three years, Tan Zuojun, general manager of state-owned China State Shipbuilding said this month, according to Serenities Daily. Calls to the company’s offices for comments were unanswered.

Shipyard Failures
Zhejiang Jingang Shipbuilding, the largest private shipbuilder in Taizhou, Zhejiang province, filed for bankruptcy last month because of debts of more than 300 million yuan and a lack of new orders, state-owned Global Times reported, citing Yu Shengyue, director of No. 2 Civil Tribunal of the People’s Court of Wenling county.
The shipbuilder had the capacity to build four vessels of over 16,000 tonnes a year, according to its website. Two calls to its headquarters went unanswered. The numbers listed on its website for its Shanghai office were no longer in service.
Ningbo Hengfu Shipping Trade (Group) Co. and Ningbo Beilun Sky Shipbuilding Co., both Zhejiang-based shipyards, have also filed to sell assets, according to state-run China Daily. The companies’ office numbers are no longer in use.
“You do need a flushing out of capacity,” said JPMorgan’s Mirchandani. “The government will still come in and provide support to the industry in general, but I do believe the support will focus more towards the larger yards.”

2012-07-30 11:03:01

China has too many ships. The glut has pushed new vessel prices to eight-year lows and caused a 49 percent plunge in first-half orders at the nation’s more than 1,500 shipbuilders. It’s also tipped smaller yards into bankruptcy and hit earnings at larger players.
“It is a pretty depressing environment,” said Ajay Mirchandani, a Singapore-based JPMorgan Chase & Co. analyst. “You just have too many yards and too few orders, which is hurting pricing and profitability.”
Orders have tumbled as a global excess of commodity, oil and container ships has damped cargo rates and deterred owners from ordering more vessels. China Rongsheng Heavy Industries Group Holdings Ltd. (1101), the nation’s biggest shipbuilder outside state control, hasn’t announced any vessel contracts this year, while Yangzijiang Shipbuilding Holdings Ltd. (YZJ)’s backlog shrank 27 percent in the year ended March because of the slowdown.
“It might take two to three years before the situation improves,” said Zhang Yao, Yangzijiang’s investor relations spokesman. “There’s definitely an adverse impact on our profits.”
Guangzhou Shipyard International Co.’s first-half profit probably fell more than 50 percent, partly because the price of under-construction vessels “dropped sharply” from a year earlier, the company said this week.
The shipbuilder has fallen 55 percent in the past year in Hong Kong trading, while Rongsheng Heavy has plunged 74 percent. In Singapore, Yangzijiang has slumped 31 percent and Cosco Corp. Singapore Ltd. (COS) has tumbled 47 percent.
“Until we have some clarity in the world economy, we won’t see any price recovery,” Rongsheng Heavy said in an e-mailed reply to Bloomberg News questions. World trade has been “negatively affected” by the global uncertainty caused by the European debt crisis, the Shanghai-based shipyard said. It declined to comment on orders this year.
Shrinking Backlogs
The order slump has caused Chinese shipbuilders’ backlog to fall 24 percent this year and pushed a monthly index of new-ship prices compiled by shipbroker Clarkson Plc to the lowest since March 2004. Yangzijiang held orders for 96 ships at the end of March, compared with 131 a year earlier. It won seven orders in the first quarter.
China has 1,536 shipyards with annual sales above 5 million yuan ($780,000), according to the China Association of the National Shipbuilding Industry.
Capacity Surge
Shipbuilding and shipping capacity surged because of speculation fueled by China’s demand for raw materials. The government also provided low-cost financing for new vessels to help support shipyards.
That combination contributed to a global surge in orders from about 2007, including for dry-bulk ships, used to haul iron ore and coal. These vessels and cooling demand are now hammering charter rates. The benchmark Baltic Dry Index (BDIY) dropped 25 percent in the year through July 25 to 982. It reached a high of 11,793 in May 2008.
Among capesize ships, the largest vessels tracked by the index, the global fleet has about doubled in five years to 1,464 at the start of the month, according to Clarkson. Three-year charter rates have tumbled to around $10,000 a day from about $55,000 five years ago, according to the London-based shipbroker.
Capesize Slump
The slump has caused orders for new capesize ships to plunge. Worldwide, 12 capesizes were ordered in the first half, compared with 71 for the whole of 2011. Prices have slumped to $46.5 million as of June, 14 percent less than a year ago and 50 percent down from the end of 2007, according to Clarkson data. Panamax prices have plunged 19 percent in the past year, while prices for 4,800-box container ships have tumbled 19 percent.
Worldwide orders for dry-bulk vessels dropped 49 percent to 9.8 million deadweight tons in the first half, according to Clarkson. Orders for all ship types fell 46 percent to 20.9 million deadweight tons, it said. Chinese shipyards won orders totaling 8.5 million deadweight tons in the period.
Chinese shipbuilders have been more affected by the orders slump than yards in South Korea, home to the world’s biggest shipbuilders, because of their greater reliance on dry-bulk vessels. South Korean yards including Hyundai Heavy Industries Co. (009450) and Daewoo Shipbuilding & Marine Engineering Co. have benefited from demand for energy equipment such as offshore units and drill ships, which are more complicated to build and offer higher margins.
Unprofitable Orders
The drop in prices means that new orders are rarely profitable for Chinese shipbuilders, particularly for smaller ones, said UOB Kay Hian Holdings Ltd. analyst Lawrence Li. Yards are also offering more generous payment terms, such as lower down payments, which is increasing financing costs, he said.
“The shipyards don’t have bargaining power,” Shanghai- based Li said. “Demand is really weak.” Prices are unlikely to rise more than 5 percent by the end of next year, he said.
Shipyard failures may help revive prices by paring competition. About half of Chinese shipbuilders may close within three years, Tan Zuojun, general manager of state-owned China State Shipbuilding Corp., said this month, according to Serenities Daily. Calls to the company’s offices for comments were unanswered.
Zhejiang Jingang Shipbuilding Co., the largest private shipbuilder in Taizhou, Zhejiang province, filed for bankruptcy last month because of debts of more than 300 million yuan and a lack of new orders, state-owned Global Times reported, citing Yu Shengyue, director of No. 2 Civil Tribunal of the People’s Court of Wenling county.
The shipbuilder had the capacity to build four vessels of over 16,000 tons a year, according to its website. Two calls to its headquarters went unanswered. The numbers listed on its website for its Shanghai office were no longer in service.
Ningbo Hengfu Shipping Trade (Group) Co. and Ningbo Beilun Sky Shipbuilding Co., both Zhejiang-based shipyards, have also filed to sell assets, according to state-run China Daily. The companies’ office numbers are no longer in use.
“You do need a flushing out of capacity,” said JPMorgan’s Mirchandani. “The government will still come in and provide support to the industry in general, but I do believe the support will focus more towards the larger yards.”

2012-07-26 10:35:31

According to South China Morning Post (SCMP), China shipbuilding industry is in the worst conditions of the last ten years. Domestic Shipbrokers reveal that overcapacity, financing pressure as well as the depressed freight rates are all staggering owners’ interests in ordering new vessels.
“The new capacity increased in the last ordering boom has greatly hindered bulker, tanker and containership shipping market and depressed the freight rates” a Hong Kong shipbroker said. Besides, the economic recession in Europe and America also curbed the demand.
According to Clarkson, Chinese shipyards totally won new orders of 182 ships in the first six months. The number stood at 561 vessels and 2036 vessels separately in the same period of 2011 and 2007. In H1 2012, Chinese shipbuilders secured vessels of 3.0m CGT while the tonnage recorded 32.54m CGT in 2007. Statistics show that 46 out of 180 Chinese shipyards delivered “ZERO” vessels in last year.
The main shipbuilding base in China – Jiangsu Province - has also seen great depression. The shipyards in Jiangsu totally secured orders for 72 vessels in the first five months, 61.7% down year-on-year. Rongsheng Heavy Industry, the biggest private shipbuilder in China, has not won any order in the first half of the year. However it is disclosed that Rongsheng was in negotiation for new orders at present.
Some analyst put forward that about 90% of Chinese shipbuilders have got no orders till now this year and 28% have got none since 2009. Many private shipyards are likely to go bankruptcy or convert to ship repairing for ship scraping business under growing budget pressure.

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