Another difficult year lies ahead for shipyards: experts
A shipyard in East China's Zhejiang Province has reportedly become the first State-owned shipbuilder to go bankrupt amid problems of overcapacity and slack demand, which are major issues that domestic shipbuilders will continue to face in 2016.
Zhoushan Wuzhou Ship Repairing & Building Co (WSR), an affiliate of State-run Zhejiang Shipping Group, commenced legal procedures for dealing with debt problems, Beijing-based news website cnr.cn reported Saturday, citing a report from the Zhoushan Intermediate People's Court. The first creditors' meeting is expected to be held in about two weeks, according to media reports.
Established in 2001, WSR had registered capital of 50 million yuan ($7.68 million), according to the court filing. As of the end of September 2015, the shipyard had about 911 million yuan in debt, including payments for workers and offshore support vessel suppliers, taxes and four unfinished vessels, the filing showed.
The shipbuilding industry has been struggling in recent years, in part due to the overall economic slowdown, Chen Daxi, vice-secretary of a branch of the Chinese Society of Naval Architects and Marine Engineers in Zhejiang, told the Global Times Sunday.
"A major index shows that the domestic shipbuilding industry has also been affected by sluggish market demand and oversupply," Chen said.
From January to November 2015, the nation's shipbuilding output was up about 10.9 percent to 36.2 million deadweight tons (DWT) while the number of orders for new vessels decreased about 59.1 percent to 23.19 million DWT, according to a report released by the China Association of the National Shipbuilding Industry (CANSI) on December 15.
WSR, as a traditional State-owned enterprise (SOE), lacked innovative management, which made its operations even more challenging, particularly when more flexible and adaptable corporate strategies were needed, Chen noted.
When the Global Times attempted to contact the shipyard for comment on Sunday, a recording said that the phone service had been suspended because the bill had not been paid.
The CANSI report noted that profits of major shipbuilders had slumped about 23.4 percent in the first 11 months of 2015. The association found that 88 companies recorded about 268 billion yuan in revenues, down 1.5 percent and 3.6 billion yuan in profits, down about 23.4 percent, both on a year-on-year basis.
Both SOEs and small private companies have been affected by the global trade slowdown, which has also had a significant impact on shipping and shipbuilding, and companies are heading into a rough 2016, Liu Wei, an analyst at Beijing-based Minsheng Financial Leasing, told the Global Times on Sunday.
"It's also the issue for companies in other countries. For example, South Korea's Daebo Shipping sought bankruptcy protection in 2015 as commodity prices dropped sharply," he said.
Chen, the vice-secretary, predicted that more merger and acquisition cases would occur in the shipping and shipbuilding industries in 2016, and more shipyard operators would face bankruptcy.
The problem of oversupply has long plagued the domestic shipbuilding industry. And that is set to continue.
During the 13th Five-Year Plan period (2016-20), global demand for new vessels is estimated to be 80 million to 90 million DWT every year. However, Chinese shipbuilding capacity will remain at about 80 million DWT, according to cnr.cn, which cited the Ministry of Industry and Information Technology (MIIT).
The shipbuilding industry is still restructuring and overcapacity won't soon be resolved, Huai Jinpeng, vice minister of the MIIT, was quoted as saying in the media report.
"The government is expected to play a supportive role in helping shipbuilders get through difficult times, for example providing proper financing channels to shipbuilders and closely evaluating their operating situations to prevent risks, " Chen said.
