Shipbuilders see orders surge

China's shipbuilding companies saw a surge of orders in the first four months of the year, data from the country's shipping association showed Tuesday, offering a glimmer of hope for an ailing industry still struggling with overcapacity and dwindling profits.

New orders stood at 11.57 million in deadweight tonnage (DWT) in the first four months of the year, up 57 percent from the previous year, according to the China Association of National Shipbuilding Industry (CANSI).

"New orders increased compared with last year. But it is still too early to conclude that the shipping industry is well on track for sustained recovery," Nie Lijuan, deputy secretary-general of CANSI, told the Global Times Tuesday.

Shipbuilding output saw a year-on-year decline of 11.9 percent to reach 13.78 million DWT in the period, CANSI pointed out.

The industrial output, export delivery and profit of 80 shipbuilders monitored by the association all declined during the first fourth months, the data indicated.

The total profit of the 80 shipbuilders was only 2.1 billion yuan ($343.1 million) in the period, down 56.7 percent from the previous year, it showed.

"The shipbuilding price has dropped by 50 percent compared with peak years before the financial crisis and many shipbuilders in the country are still suffering losses," Nie said.

According to the latest report by Danish Ship Finance, the shipbuilding price will reach a new low of about $1,456 compensated gross tonnage by the end of 2013, almost the same level as in 2002.

"The growth of new orders in the first four months was caused by the low base figure last year. Ship owners chose to place orders and invest in new ships to take advantage of low prices at the time," Liu Wei, an analyst with the China Shipbuilding Economy Research Center, told the Global Times.

"The surge in new orders may also have been caused by speculative buying by some rich ship owners. With sluggish trade and the world economy still showing no signs of recovery, the shipping industry will not achieve a turnaround in a short time," Liu said.

China's shipbuilding output stood at 60.21 million DWT in 2012, down 21.4 percent year-on-year, while new orders totaled 20.41 million DWT, down 43.6 percent from the previous year, official data showed.

An industry insider who declined to be named told the Global Times that there is a general consensus that it would take around 3 years for the industry to achieve a balance of supply and demand.

"The slump in the shipbuilding industry provides a good opportunity for ship owners to restructure their business and get rid of old vessels with high energy consumption," said Nie from CANSI said.