Shipbuilders in China will continue facing rough weather. According to a report in Bloomberg, new orders received by Chinese shipbuilders fell by nearly half last year from 2014, suggesting more consolidation is in order as the country’s appetite for raw materials wanes and shipping rates languish at multiyear lows.
Shipyards in China received new orders amounting to 31.3 million deadweight tons last year, a world-leading 34 percent share of the global market. Backlog orders fell 12 percent to 123 million deadweight tons, or 36 percent of global market share.
The shipbuilding will lag behind their foreign rivals as cumbersome financing conditions and prolonged excess capacity continue to crimp industry profits and push smaller shipyards out, experts said.
More than 30 major large-scale shipyards went bankrupt over the past two years, according to the China Association of the National Shipbuilding Industry, all of which were capable of manufacturing high value-added ships such as chemical tankers and vehicle carriers.
China Rongsheng Heavy Industries Group Holdings Ltd., once the country’s largest private shipyard, exited the sector last year amid heavy losses and changed its name to China Huarong Energy Co. to reflect its new business focus.
Zhejiang Shipping said that the shipyard’s bankruptcy was due to its massive debt burden of 911 million yuan ($140 million), including payment in arrears to workers, parts suppliers and taxation authorities.
Wuzhou Shipyard suspended operations after it delivered a 2,500 twenty-foot equivalent units container ship to Shanghai Zhonggu Xinliang Shipping Co in July. It also has one 2,500 TEU container ship, two barges and one tugboat which remain undelivered.
Jiangsu-based Nantong Mingde Group Co and Jiangsu Daoda Marine Heavy Industry Co and Zhejiang Zhenghe Shipbuilding Co are declared bankrupt.
China has 1,600 shipbuilding-related enterprises, including 800 large shipyards, employing 1.4 million people, with an annual industrial output value of 800 billion yuan, according to the National Development and Reform Commission.
Ren Yuanlin, executive chairman of Yangzijiang Shipbuilding, which remains profitable despite the challenging market, has predicted that China will eventually be left with 20 to 30 shipbuilding companies after the severe consolidation period for the industry is over, and it could still be a few years away.