Mainland shipyards on course to consolidate
Mainland shipyards are set to consolidate as declining orders coupled with tighter credit controls make it harder for smaller shipyards to compete with their larger rivals.
'Shipyard overcapacity is a big problem and I see a lot of consolidation ultimately taking place,' said Ong Choo Kiat, president of Taiwanese shipowner U-Ming Marine Transport. Ong said mainland authorities were 'trying very hard to consolidate' the shipbuilding industry into around five companies that currently have 50 to 60 per cent of total shipbuilding capacity. These include the two largest state-owned groups, China State Shipbuilding and China Shipbuilding Industry, along with private shipbuilders such as China Rongsheng Heavy Industries.
'I can't see how smaller yards can survive,' Ong said, noting the higher labour and raw material costs, few orders and difficulty securing credit.
This view was reinforced by figures from the China Association of the National Shipbuilding Industry, showing the volume of new orders fell 29.2 per cent to 23.58 million deadweight tonnes in the first seven months compared with a year ago.
It said many shipyards had not received a single order in that period.
The data was not as bad as 2009, when the volume of orders fell 70 per cent to 16.92 million dwt between January and September after bank credit and global trade came to a standstill following the 2008 financial crisis. Against this background, said Ong, smaller yards were likely to be taken over by bigger yards.
His views echoed those of China Rongsheng chief financial officer Sean Wang Shaojian, who said there was scope for the industry to consolidate, with larger shipyards focused on higher-value vessels including those for the offshore oil industry.
China Rongsheng has already reduced its order target for new ships this year from around US$3 billion in spring to US$2.3 billion in August.
Dale Ploughman, chief executive of Seanergy Maritime Holdings, said the price of a 76,000 dwt Panamax dry bulk carrier was about US$29 million. 'We cannot get the charter rate out of the market to make it worthwhile to order these ships,' he said.
Maritime classification societies, which oversee the construction of ships to ensure vessels meet international safety standards, estimate there are some 1,500 shipyards in China capable of building oceangoing merchant vessels, although shipping industry sources put the number at around 3,500.
Since the shipping boom in 2003 there has been unfettered growth in shipbuilding capacity as mainland authorities made it a priority for China to become the world's largest shipbuilding nation by 2015. Ministry of Industry and Information Technology data show the mainland overtook South Korea last year to become the world's biggest shipbuilder. It said the country's shipyards built ships totalling 65.6 million deadweight tonnes last year, although actual shipbuilding capacity is estimated to be closer to 100 million dwt.
But there has been a dearth of orders this year as shipowners hold back on new contracts, fearing there are already too many ships on order.