Smaller ship­yards to be put into dry­dock

China Daily (Canada) - - BUSINESS - By ZHONG­NAN zhong­nan@chi­nadaily.com.cn

China sig­naled that it will cut its vast ship­yard army to get in­dus­trial growth back on a healthy track this year, as its earn­ing abil­ity fal­ters amid cheap ves­sel prices, blind ex­pan­sion and spec­u­la­tion in the ship­build­ing sec­tor.

China will dras­ti­cally curb the num­ber of ship­yards, docks, berths and main­te­nance fa­cil­i­ties it opens, said Li Dong, deputy di­rec­tor-gen­eral at the de­part­mentof equip­ment in­dus­try at the Min­istry of In­dus­try and In­for­ma­tion Tech­nol­ogy.

“Blind in­vest­ment ac­tiv­i­ties in the ship­build­ing sec­tor must be re­strained, es­pe­cially in the re­gions of the Bo­hai Bay, Pearl River Delta and Yangtze River Delta,” Li said.

Mean­while, he said, “ca­pa­ble ship­yards will be sup­plied with tech­ni­cal and fi­nan­cial as­sis­tance to de­velop high-end ships and off­shore en­gi­neer­ing prod­ucts to catch up with ri­vals such as SouthKorea and Sin­ga­pore”.

As China’s pol­icy banks, such as China De­vel­op­ment Bank and the Ex­port-Im­port Bank of China, be­come more cau­tious in ap­prov­ing re­fund guar­an­tees — in par­tic­u­lar, small and medium-sized ship­yards — Li warned that un­qual­i­fied ship­yards should not even think about pro­duc­ing off­shore en­gi­neer­ing prod­ucts such as oil rigs and off­shore pipe-lay­ing ves­sels for for­eign ship own­ers.

“Small and medium-sized ship­yards with­out or­ders or with a fe­worders will grad­u­ally with­draw from the mar­ket over the next five years,” Li said.

As the world’s largest ship­build­ing coun­try, China has 1,600 ship­build­ing-re­lated en­ter­prises (in­clud­ing 800 large ship­yards), with­anan­nual in­dus­trial out­put value of 800 bil­lion yuan ($130 bil­lion).

A to­tal of 1.5 mil­lion people work in the in­dus­try, ac­cord­ing to the Na­tional De­vel­op­ment and Re­form Com­mis­sion.

New or­ders hit 69.84 mil­lion dead­weight tons in 2013, up 242 per­cent from a year ear­lier.

On­go­ing or­ders to­taled 131

OUT­PUT OF CHINA’S SHIP­BUILD­ING IN­DUS­TRY

65.60

76.65 mil­lionDWT, a 23 per­cent rise year-on-year.

“Even though China re­ceived more or­ders than Ja­pan or South Korea last year and this year, new ship prices hit rock bot­tom over the past two years, and there is no sign

60.21

NEW OR­DERS IN CHINA’S SHIP­BUILD­ING IN­DUS­TRY

75.23

69.84 of re­cov­ery,” said Zhang Guangqin, pres­i­dent of China As­so­ci­a­tion of the Na­tional Ship­build­ing In­dus­try. “It will take an­other five years for over­ca­pac­ity to be eased.”

Con­crete ac­tion al­ready has been taken by ma­jor ship­build­ing prov­inces. Shang­hai an­nounced ear­lier this month that it will cut its ship­build­ing ca­pac­ity to 12 mil­lion DWT be­fore 2017.

Jiangsu also promised to cut 10 mil­lion DWT of ship­build­ing ca­pac­ity, down to 25 mil­lion DWT over the next five years.

In the mean­time, the de­vel­op­ment and re­form com­mis­sion of Zhe­jiang prov­ince is draft­ing a plan to con­sol­i­date large ship­yards and elim­i­nate small and low-end ship­yards within five years.

The prov­ince is ea­ger to op­ti­mize all its re­sources to de­velop high-end ves­sels and off­shore en­gi­neer­ing prod­ucts such as liq­ue­fied nat­u­ral gas car­ri­ers, drilling ves­sels, large ice­break­ers and chemical tankers.

Dong Li­wan, a pro­fes­sor at Shang­hai Mar­itime Univer­sity, said the Crimea is­sue be­tween Rus­sia and the West will cre­ate an op­por­tu­nity for Chi­nese ship­yards to get or­ders from Europe for LNG car­ri­ers.

“Rus­sia may cut its nat­u­ral gas sup­ply to some mem­bers of the Euro­pean Union if the con­flict in Crimea continues to es­ca­late. There­fore, coun­tries such as Bri­tain, Ger­many and Italy will turn to their shale gas-rich ally the United States to re­solve a pos­si­ble en­ergy cri­sis sooner or later,” Dong said.

The world’s LNG ship mar­ket is dom­i­nated by South Korea, Ja­pan and China. South Korea be­came the world’s largest LNG ves­sel man­u­fac­turer last year, hold­ing 68 per­cent of global or­ders. But its pro­duc­tion ca­pac­ity is al­ready sat­u­rated.

Ja­pan faces the sim­i­lar prob­lem of cur­rently pro­duc­ing LNG ships for do­mes­tic com­pa­nies to se­cure its nat­u­ral gas sup­ply on sea routes, af­ter the nu­clear leak in Fukushima in 2011.

“Un­der such cir­cum­stances, those Euro­pean na­tions have no choice but to or­der a con­sid­er­able num­ber of LNG ships from China to en­sure they can get suf­fi­cient gas from a seller across the At­lantic,” said Dong. “LNG ships also are a good prod­uct with which China can up­grade its ship­build­ing sec­tor.”

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