China shipbuilding orders drop nearly one-third in first half

China’s ailing shipbuilding sector has seen a near one-third year-on-year decline in newbuilding orders over the first half of this year, leaving work-hungry Chinese yards still struggling to stay afloat in the troubled sector.

New shipbuilding orders received from January to June this year came up to 11.51m dwt, down 29% compared to the same period of 2016, according to data from China’s Ministry of Industry and Information Technology (MIIT).

With China being a huge shipbuilding market accounting for 42.4% of the world’s new ship orders, the decline reflects slowing interests by shipowners on buying new ships due to the protracted oversupplied market.

As at end-June 2017, Chinese yards sat on an order backlog of 82.84m dwt, deflating by 30.5% compared to the year-ago figure.

In completed newbuild tonnage, Chinese shipbuilders built a combined 26.54m dwt from January to June this year, representing a marked 57.4% increased compared to the same period of last year.

The lengthy recession of China’s once-sprawling shipbuilding industry has led to many casualties, from speculative greenfield yards to previously reputable and successful big shipbuilders.

But the consolidation is seen as a necessary evil to curb the severely excessive shipbuilding capacity in the country, left behind after the great shipping boom market of 2003-2008.

While there are still 358 ‘active’ Chinese shipyards as of start July this year, according to Clarksons, the number has dropped significantly from 934 recorded at the beginning of 2009.

Clarksons defined an ‘active’ yard as one with at least one unit (1,000+ gross tonnes) on order. With 30% of currently active yards set to complete construction of their ships on their orderbook by the end of this year, China’s shipyard capacity is expected to continue to slide, the shipping analyst believed.

Apart from the active yard category, Beijing has its set of ‘white list’ shipyards, shortlisted via a peer-to-peer and selected industry associations judging process based on a given set of criterias.

Since the first batch of white list yards was announced in September 2014, the list has gone through a few rounds of reshuffling amid the consolidation, with the number standing at 70 today, much lower compared to the 358 active yards cited by Clarksons.

The 70 white list Chinese shipyards comprise of 37 state-owned, 24 privately-owned, seven jointly-owned and two sole proprietorship yards.

Previously, 10 privately-owned yards have fallen out from the list as their shipbuilding operations have ceased, including once well known companies such as Zhejiang Shipbuilding, Jiangsu Rongsheng Heavy Industries, Nantong Mingde Heavy Industry, Qingdao Yangfan Shipbuilding, and Yangzhou Dayang Shipbuilding.