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Shipbuilding Orders Floundering
 

November 9, 2011

The NDRC released a report on the shipbuilding industry recently. New orders are down by 43% and orders on hand are down by 14%. The report claims that shipyards making large ships (> Panamax) are doing ok, but orders for smaller ships have dropped of sharply, dragging profitability down too. Rising costs are blamed, as are external economic conditions.

Total capacity, according to the NDRC, is 60 Mn DWT, an increase of 20% on 2010, however, unlike most other industrial markets in China, shipbuilding has remained under capacity. In 2010 56 Mn DWT was launched.

It raises the question, though, on the structure of the industry. China’s shipbuilding industry is made up of not only the very large shipyards, such as those that are owned by CSSC and CSIC, but also small yards that are used for coastal and inland waterway shipping. According the NDRC:

“Most experts believe that in the future, market demand for shipping will significantly change. Growth in LNG vessels, marine equipment and other large ships will remain active... But the price of new ships, especially bulk carriers will continue to slump, tanker prices will fall and orders for container ships will gradually slow down.”

From the China Shipping Industry Yearbook 2010 we can see that that is quite a big slump.

Newly ordered ships by deadweight ton

China Newly Ordered Ships by Deadweight Ton

The downturn in orders appears to be having an effect on related markets. From Diesel Progress this:

“Jinan Diesel, a Chinese state-owned producer of medium- and high-speed engines, is looking to borrow up to RMB 1.3 billion from its parent company China National Petroleum Corporation (CNPC), according to press reports in China.

According to a statement by its directors, Shenzhen listed Jinan Diesel’s shareholders voted for extended loan guarantees of up to RMB 600 million directly from CNPC and RMB 700 million from China Petroleum Finance Co. Ltd. (a CNPC financing arm) in order to address a “large funding gap” in its operations. Interest rates on the loans are said to be 4.5%, well below the current market rate of 6.56%.”

 

About GCiS China Strategic Research

GCiS (www.GCiS.com.cn) is a China-based market research and advisory firm focused on business to business markets. Since 1997, GCiS has been working with leading multinationals in sectors ranging from technology to industrial markets, medical, chemicals, resources, building and constructions and a few others.

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