China Rongsheng sweats on rescue package

China Rongsheng Heavy Industries' cry for help from the government and creditors to get it through a sharp downturn for shipbuilders is likely to fall on deaf ears, industry experts say.

The mainland's largest privately owned vessel maker has seen its shares sink in value as mounting debts and falling orders forced it to seek a rescue package and slash its workforce. The company's actions resulted in a protest that sealed off the entrance to its main plant and led to the suspension of trading in its shares on Thursday.

"The shipbuilding industry is like a falling knife and the worst is yet to come," said Wang Xuefeng, a professor at Shanghai Maritime University. "It will be some time before the shipyards can see a ray of hope."

A severe vessel glut that resulted in a sharp fall in orders has been plaguing the shipyards in China, the world's largest shipbuilding country. The China Association of National Shipbuilding Industry predicts a third of the nation's 1,600 shipyards would be closed in five years.

Rongsheng was saddled with short-term debts of 19.3 billion yuan (HK$24.2 billion) at the end of last year when it posted an annual loss of 572.6 million yuan.

Beijing's determination to tighten monetary policy became the straw that "broke the camel's back" as banks refused to extend new loans to Rongsheng while forcing it to pay back the debts overdue, according to an industry official close to the private shipbuilder.

"Banks are not ignorant of the industry's gloomy outlook," the source said. "Neither the central government nor the local authorities were willing to help the troubled shipyards out, particularly privately owned ones."