The mainland's shipbuilding sector is set to consolidate as state-owned shipyards take over smaller privately owned operators in the face of overcapacity and a dearth of new orders, a senior Hong Kong banker said.
Pakco Lam, a senior manager with Bank of China (Hong Kong), said several mainland shipyards had gone bankrupt after new shipbuilding orders dried up in the wake of the slump in the shipping market that started in 2008.
He said other yards were also facing cash-flow problems as they completed existing orders with no new contracts beyond the next two years.
'There is an oversupply [of capacity] in Chinese shipyards. Smaller shipyards are facing bankruptcy,' he said. 'I think it (consolidation) will happen,' he told about 250 shipping executives at a conference in Singapore organised by the shipowners' lobby group, the Baltic and International Maritime Council.
Lam said merger and acquisition activities by state-owned shipbuilders would take place but added takeovers would depend on each shipyard's order book and the state-owned shipbuilders' cash flow.
There are two large state-owned shipbuilding groups: China State Shipbuilding controls a raft of individual shipbuilding and ship-repair companies south of Shanghai, while China Shipbuilding Industry controls yards in the north.