Chinese shipyards are offering to sell vessels at discounts of more than 20 percent as builders look to protect market share from higher quality Asian rivals and stay afloat amid a wave of consolidation, industry sources said.
Rock bottom freight rates, slowing economic growth and an oversupply of ships have forced maritime firms to cancel or delay hundreds of new orders, leaving yards especially in China with unwanted vessels for sale.
As many as half of China's 1,600 shipbuilding companies are expected to go bankrupt or be acquired by larger rivals in the next two to three years and pressure is growing to move inventory, according to senior Chinese industry executives.
"We do routinely see a 5-10 percent discount for Chinese ships. So I'm not surprised if that gap widened to 20 percent," said Alex Adamou, analyst at London-based broker firm Seasure Shipping.
"The fact is that Japanese and South Korean yards are longer established and intend to have better technology, and therefore able to build higher quality vessels."
South Korea surpassed China last year as the industry's most sought after shipbuilder, as owners preferred more advanced and fuel-efficient vessels to the "cookie-cutter" dry bulk carriers and tankers that Chinese builders are known for.
SALE NOTED LAST WEEK
China's Jinhai Heavy Industry resold a 79,000 deadweight-tonne panamax ship at around $23.5 million in the last week, brokers said, more than 20 percent lower than the $30-31 million Japanese shipyards are offering for similar vessels, and less than $26 million from South Korean builders.
But overall sales by Chinese yards have been difficult as struggling shipowners seek quality vessels to offset rising maintenance and fuel costs. The benchmark Baltic Exchange's dry freight index has fallen more than 45 percent so far this year.
"In general, the older designs of Chinese-built vessels use more steel and are deeper than Japanese vessels, leading to higher fuel consumption," said Frode Morkedal, analyst with broker firm RS Platou Markets.
Only the largest Chinese shipyards such as China Shipbuilding Industry Corp, China Rongsheng Heavy Industries and Yangzijiang Shipbuilding, are expected to survive this round of consolidation.
South Korea's Daewoo Shipbuilding & Marine Engineering , Hyundai Heavy Industries and Samsung Heavy Industries have benefited from the industry's move away from China's cheaper vessels.