China shipyard orders hit high

PUBLISHED : Wednesday, 03 December, 2003, 12:00am
UPDATED : Wednesday, 03 December, 2003, 12:00am

No1 builder records a 330pc rise in deals this year as global demand for raw materials leads to calls for more tonnage

The global boom in demand for raw materials more than tripled orders for the mainland's No1 shipbuilding group this year and is spurring a multibillion-dollar spending spree on infrastructure to support the fast-developing industry.

The China State Shipbuilding Corp (CSSC) saw orders for new shipping tonnage - from boxships to bulk carriers and oil tankers - jump a comparative 330 per cent in the first 11 months, reaching 7.05 million deadweight tonnes (dwt), according to vice-president Li Zhushi.

The surge in orders more than doubled the company's order book to 10.2 million dwt and would keep the group's shipyards busy for at least three years as China's shipbuilding potential took the global spotlight, Mr Li said yesterday.

'China's shipping industry is facing a historical opportunity, where the readjustment of the world's shipbuilding structure is being accelerated and shipbuilding centres continue to shift towards Asia,' Mr Li told delegates at the biennial Marintec China conference.

'So long as we grasp this opportunity and bring our advantages into full play, our shipbuilding industry will develop in leaps and bounds and China will become the No1 shipbuilding country.'

As with aircraft manufacturers such as Boeing and Airbus Industrie, shipbuilders are extremely hesitant to put a value on their deals, fearing it may restrict their ability to cut more profitable contracts in future.

Speaking on the sidelines of the conference, one senior CSSC official declined to put a value on orders this year or next year, saying only: 'The market has been very good this year. We have yet to calculate a value for next year's deliveries, but it will certainly be higher than this year.'

He said the corporation was negotiating with foreign and domestic buyers, but the first available delivery slots for the bigger vessels would be mid-2007.

China State Shipbuilding has set a course to become the world's biggest shipbuilding group by volume by 2015, according to Mr Li. In August, it received state approval to build massive yards - at Nansha, Guangdong and Shanghai - to help it achieve that goal.

Building has already started on a 4.5 billion yuan shipyard in Nansha. It is the largest shipyard in southern China and covers 4.5km of waterfront north of Longxue Island, near where Henry Fok Ying-tung is building Guangdong's latest 'deep-sea' container terminal.

However, that project will be dwarfed by the 20 billion yuan facility to be built on 8km of shoreline on Changxing Island, near Shanghai.

The Shanghai municipal government is encouraging foreign investment in the Changxing project, but Mr Li was coy about what size stake was on the market to non-domestic companies.

'We have not set a clear mark for the size of the stake available to foreign investors, but that is certainly open to discussion,' he said.

China's appetite for raw materials to feed its booming manufacturing centres has fuelled a banner year for most sectors of the highly cyclical shipping industry.

For example, the mainland's burgeoning oil consumption is playing an increasingly influential role in global demand for tanker capacity and the daily charter rates the vessel's owners can request.

Mainland crude oil imports were up a comparative 33 per cent at the end of last month to 2.2 million barrels a day, while the import of oil products surged 54 per cent during the same period.

The demand for maritime oil transport vessels, or tankers, has sent would-be owners scurrying to leading shipyards in South Korea, Japan and, in the last half of the year, China.

According to Zhang Guangqin, vice-minister for the Commission of Science, Technology and Industry for National Defence, China's yards should seize the opportunity presented by the booming shipping industry to improve efficiency and secure their future.

'China's shipbuilding industry is favoured by the rare combination of brisk domestic and international markets. This provides our industry with ample development space,' Mr Zhang said. 'Compared with Japan and Korea, we still lag significantly behind in organisation, management and production efficiency. Our low production efficiency is offsetting the advantage we gain from lower labour costs.'

Chinese yards take 12 to 14 months to produce container vessels in the 5,500 20-foot equivalent units capacity range. In contrast, their counterparts in Japan and Korea take seven to eight months.