• Sat
  • Jul 12, 2014
  • Updated: 2:31pm

Smaller shipyards could collapse in industry upheaval

PUBLISHED : Saturday, 11 December, 2010, 12:00am
UPDATED : Saturday, 11 December, 2010, 12:00am

China's shipbuilding industry is set for an upheaval likely to lead to the collapse of smaller, privately owned shipyards, according to a leading analyst with a Norwegian bank.

Thor Andre Lunder, offshore equity researcher for DnB NOR Markets in Singapore, said that with overcapacity among mainland shipbuilders, 'it is likely small yards will disappear rather than consolidate'.

He doubts the two large shipbuilding groups, China State Shipbuilding Corp and China Shipbuilding Industry Corp, would be interested in consolidating the industry. CSSC already owns shipyards in Shanghai and to the south of the Pearl River Delta, while China Shipbuilding owns facilities north of Shanghai in the Bohai Sea.

Different sources estimate the number of mainland shipyards capable of building ships for big export markets at 1,500 to 3,500.

Mainland shipyards saw a resurgence in orders after the worst effects of the financial crisis started to ease last year. Figures from the China Association of National Shipbuilding Industry show mainland shipyards won orders totalling 9.5 million deadweight tonnes last July, the highest monthly total since the crisis began in August 2008. But Lunder said the number of new building orders had recently started to tail off. He forecast that shipyards would 'struggle for the next two or three years' while 'margins would be squeezed'.

He thinks that China's shipbuilders will try to build everything from small dry-cargo ships to 420,000 deadweight tonne iron ore carriers, and larger shipbuilding groups will diversify. This will include building large 'drillships' - ships fitted with drilling apparatus - that can cost US$500 million, and sophisticated floating, production and storage tankers for the offshore oil industry.

He said China would consolidate its position as the largest shipbuilding nation, competing with South Korea for orders of large vessels.

Figures from the shipbuilding association said China had 46 per cent of new orders in the first half of this year, compared with Korea's 38 per cent. 'It doesn't matter whether owners build in South Korea or China so long as there is sufficient supervision' of the work, Lunder said.

He said mainland shipyards traditionally had a lower cost base than their Asian and European competitors, which combined with financial support from provincial and national governments and banks, gave them an edge.

Share

For unlimited access to:

SCMP.com SCMP Tablet Edition SCMP Mobile Edition 10-year news archive
 
 

 

 
 
 
 
 

Login

SCMP.com Account

or