Analysts predict troubled winds ahead for China shipbuilding industry

The shipbuilding industry will continue to shrink amid decline in global orders and overcapacity, an official from the Ministry of Industry and Information Technology, which oversees the sector, said.

China alone will build ships with a total carrying capacity of 80 million tons next year, equal to the forecasted increase in global demand, estimates from the ministry showed.

The industry is plagued by excess capacity, said Huai Jinpeng, a vice minister from the regulator, even after many large private ship makers have gone bankrupt or stopped production.

In the first 10 months of 2015, Chinese ship builders have received orders for new vessels totaling 20.3 million tons, down 62 percent from the same period last year, data from the China Association of the National Shipbuilding Industry (CANS) show.

Orders for new ships have slumped amid weak commodity prices. The Baltic Dry Index, which tracks the shipping cost of bulk commodities, plunged to an all-time low since it was launched three decades ago. The index has sunk 95 percent since its peak in 2008.

The cost of shipping on several sea-lanes linked to the Shanghai port has hit a rock-bottom in recent months, said Fang Huaijin, vice president of the Shanghai International Port (Group) Co. Ltd.

Global demand for bulk carriers has fallen by 80 percent from that of 2014, according to Clarksons, a shipping industry data provider.

This has worsened the crisis in the Chinese shipping industry because almost two-thirds of the country’s shipyards are geared to build bulk carriers, Jin Peng, the secretary of CANS, said. “China lags behind countries like South Korea in terms of orders to make more sophisticated vessels, such as container ships and liquefied natural gas carriers,” he said.

Chinese shipyards need to retool to build container ships to weather the slump, Li Yanqing, a researcher from China Shipbuilding Industry Corp. said.

But several big shipyards have already gone belly-up. The list includes East Heavy Industry and Mingde Heavy Industry, in the eastern province of Jiangsu, and Zhuangji Ship Industry, in the southern province of Zhejiang.

Rongsheng Heavy Industries Group, once China’s largest shipbuilder, has also stopped production and is struggling to repay its 20.4 billion yuan in debt, the company said in March.

Protests have broken out since September at several financially-strained companies in the eastern provinces of Fujian and Jiangxi with workers demanding delayed paychecks.

 

 

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