In Shipbuilding News 04/05/2015
Yangzijiang Shipbuilding (Holdings), China’s biggest privately owned shipyard, expects the industry to shrink significantly in the next three years, reversing almost a decade of boom.
In three years’ time, there might be only 30 “active” shipyards in China, down from more than 100 now, Yangzijiang chairman Ren Yuanlin said on Thursday.
“There will be mergers and acquisitions as well as closures as the shipbuilding industry undergoes restructuring,” Ren said, adding that the shipping sector did not look “optimistic” at the moment.
Orders at Chinese shipyards fell 77 per cent in the first quarter. Shipbuilders have sought government support as excess vessel capacity drives down shipping rates and prompts some shipowners to cancel contracts.
China Huarong Energy, once the nation’s largest private yard, ran into financial difficulties in the past two years amid a slump in contracts and competition with state-owned builders.
Yangzijiang, which is listed in Singapore, was reviewing a proposal made by China Development Bank, Bank of China and others to buy a stake in the shipbuilding and offshore engineering businesses that Huarong, previously China Rongsheng Heavy Industries, was selling, Ren said.
Shares of Yangzijiang rose as much as 1.73 per cent before closing 1.38 per cent ahead at S$1.465 (HK$8.58) On Thursday. The stock has climbed nearly 22 per cent this year, compared with a 3.4 per cent rise in the Straits Times Index.
Ren said the proposal the company received on Huarong’s assets lacked details, and it needed time to assess it. A decision would be made by June, he said.
Huarong said in March it was talking to a Chinese-listed firm to sell the businesses. It has been searching for funds after the economic slowdown and massive overcapacity had what it called a “profound impact” on the shipping industry last year. The firm is shifting its focus to energy, as reflected in its name change.
If Yangzijiang decided to buy a stake, it might raise part of the funds in the Singapore stock market, and could also tap Hong Kong, Ren said.
Yangzijiang had told the creditors and other parties that it would consider investing only if the businesses Huarong was selling were “clean” of debt, Ren said.
China’s shipbuilding industry is undergoing a restructuring as global orders for vessels have slumped. The government last year identified 51 shipyards, including Yangzijiang, deemed worthy of policy support.
Utilisation of shipbuilding facilities in the country has fallen to 60 per cent this year, which was “substantially” lower than the global average and the optimal level for the industry, Yangzijiang said. In 2010, the rate was 75 per cent.
Yangzijiang won US$370 million of orders in the first quarter, down from US$1.07 billion a year ago. Its orderbook stood at US$4.6 billion at the end of March, with deliveries stretching until the end of 2016.
Yangzijiang reported on Thursday first-quarter net income of 707 million yuan on revenue of 3.04 billion yuan, down from 799.2 million yuan and 3.55 billion yuan, respectively, a year earlier.
