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Sinking orders for China's shipyards

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China's shipbuilding industry is heading for its worst year for new orders won in the decade or so since the mainland shipping boom began, according to industry figures.

Shipbrokers said a combination of factors, including overcapacity, difficulty in raising cash and low freight rates, had deterred shipowners from ordering new vessels.

'The influx of new tonnage hitting the water in the past few years has hit the big three markets - dry cargo, tankers and container ships, forcing down freight rates as overcapacity outpaced the growth in cargo volumes,' one Hong Kong shipbroker said.

Economic conditions in Europe and North America and slowing growth in China had also dampened demand, while tighter monetary controls following the global financial crisis triggered by the 2008 Lehman Brothers collapse had made it harder for shipowners to secure finance to pay for the ships, he added.

'The downturn is affecting shipbuilders not just in China, but in the two other large shipbuilding countries, South Korea and Japan,' a rival Hong Kong-based shipbroker said. The Ministry of Knowledge Economy in Seoul said the export value of ships and offshore structures produced by South Korean shipbuilders could fall to US$43 billion this year, down from a record US$54.5 billion last year, and the first annual drop in 19 years.

Figures released this month by British shipbroking house Clarkson show that China's shipyards secured contracts for just 182 ships in the first six months of the year. Last year the shipyards won orders for 561 vessels. The number of orders is down from the peak of 2,036 vessels secured in 2007 and 463 ships in 2004.

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