Restructuring of Chinese shipbuilding industry might be a good news to Korean shipbuilders.
Jung Woo-Chang, analyst from Mirae Asset Securities of Korea said that Chinese financial institutions required compatriot shipbuilders to increase down payment by reforming Heavy-tail payment term. The analyst explained, “This is part of measures released by the Chinese government in order to proceed with restructuring and M&A for industries struggling due to overcapacity in facility.”
Recently, Chinese banks have been asking domestic shipbuilders to develop the ratio of down payment from the current 1-5% to 15-30%, which is 10-15% higher than industrial average. Jung prospected, “This measure of Chinese financial industry seems to be positive to Korean shipbuilding industry with an expectation that Korean shipbuilders might see improvement in financial structure amid easing overall competition in commercial vessel market and Koreans keeping expanding their down payment ratio from the current 10-20%.”
In addition, the analyst said that recently Clarkson's newbuilding price index recorded 128 point, keeping the uptrend seen in the first week of July and added, “Newbuilding price recovery is seen to continue throughout the second half of this year as Korean shipbuilders turn to carrying out a selective newbuilding contracting activity in line with orderbook recovery.”
Moreover, new order momentum in commercial ship market is also expected to persist in the second half. As the uncertainty of macro economy, such as Eurozone and etc., is somewhat easing, overcapacity situation seen in commercial ship market is likely to gradually improve from the second half, with new order momentum staying still, the analyst forecasted.