Beijing prepares rescue scheme for shipbuilders

PUBLISHED : Wednesday, 21 January, 2009, 12:00am
UPDATED : Wednesday, 21 January, 2009, 12:00am

Beijing will launch a rescue effort for shipbuilders struggling against weakening demand for new vessels and rising order cancellations, industry sources and media reports say.

China replaced Japan as the world's second-largest shipyard last year as demand for bulk ships and tankers increased.

But mainland shipyards have been swamped by order cancellations since the third quarter of last year, as shipowners scaled back fleet expansion plans amid the credit crunch, and softening demand for raw materials and industrial goods.

'Since November last year, the State Council has identified 10 industries including steel, vehicle and shipbuilding sectors, as targets of the upcoming rejuvenating programme,' said an executive from China State Shipbuilding Corp yesterday.

'We have been expecting the measures to come sooner or later.'

The draft of the rescue plan for the shipbuilding industry had been completed by the National Development and Reform Commission and would be rolled out shortly before or after the Lunar New Year, the National Business Daily reported yesterday.

The measures were expected to be designed to stimulate domestic demand for vessels to help offset falling overseas orders, said the report, quoting a source from the National Shipbuilding Industry Institute.

Measures to encourage domestic shipping firms to replace old vessels were also expected, and the Export-Import Bank of China could also offer more financing facilities to mainland shipbuilders, the report said.

In the first nine months of last year, mainland shipyards received orders totalling 57.17 million deadweight tonnes, down 11 per cent year on year, data from the China Association of the National Shipbuilding Industry shows. Globally, shipyards suffered a 35 per cent drop in new orders in the first 11 months, said Clarksons, an international ship broker.

Worse than just declining orders, mainland shipyards are suffering from outright cancellations due to tightening credit markets and a lukewarm outlook on trade.

Reports suggest that at the end of October, mainland shipyards recorded 13.5 million dwt of order cancellations, or 6 per cent of existing orders.

'We are looking forward to the stimulus plan, although our vessel orders are intact,' said Guangzhou Shipyard International company secretary Li Zhidong.

The firm is the biggest mainland shipyard building small tankers.

Shares in Guangzhou Shipyard dropped 3.06 per cent to HK$9.19 yesterday.