Shipbuilder seeks private capital
China State Shipbuilding Corp hopes to buoy its 15 billion yuan expansion plans with private investment capital, but will avoid equity markets for now, according to the company.
New shipbuilding facilities in Changxing Island in Shanghai and Longxue Island in Guangzhou will almost triple China State's capacity to 11 million tonnes by 2008, the company said in Hong Kong yesterday.
'Private investors are always welcome,' vice-president Li Zhushi said. 'We have no plan to raise funds from the capital markets. We are well-supported by banks.'
The initial investment for Changxing Island is about 10 billion yuan. The facility will be the future home of China State subsidiary Jiangnan Shipyard Group.
Building will start next year and the first two docks should be ready in 2007. Two more will come on line in 2008.
The five billion yuan Longxue Island project should be operational the same year. Mr Li said it would be 'connected' to Guangzhou Shipyard International, its Hong Kong-listed vehicle. The details have yet to be worked out.
'Longxue is in Guangdong. It's reasonable that it be linked with Guangzhou Shipyard,' he said.
China State vows to be the world's biggest shipbuilding company by 2015, with annual production capacity of 14 million tonnes.
In the first six month this year, the firm received 2.2 million tonnes in orders. Its docks are booked until 2007 with 12.01 million tonnes in orders worth 50 billion yuan.
However, rising steel prices are eating into profit margins, said Ma Guodong, president of Hudong-Zhonghua Shipbuilding Group, a China State subsidiary.
'One remedy to rising costs is to increase productivity and shorten the shipbuilding cycle,' he said. 'We hope to take more orders when vessel prices are high.'
A 75,000-tonne Panamax bulk carrier costs US$29 million this year against US$19 million, the company said.
