Is China Shipbuilding Sinking into Tough Waves?
The world’s largest shipbuilding nation China is facing some tough years ahead as new-vessel orders weaken and order backlogs decline, Caixin reported quoting China Association of the National Shipbuilding Industry (CANSI).
According to the industry association, in the first half of 2017, new orders received by Chinese shipbuilders plunged by 29 percent year-on-year in terms of total estimated freight volume for the new ships, the report said.
The new orders are totaling 11.51 million deadweight tons. Deadweight tonnage is how much a ship can safely carry, not the weight of the ship itself.
The order backlog held by Chinese shipyards also dropped 30.5% from a year earlier to 82.84 million deadweight tons, the association said.
“By 2019, idle capacity will likely go up significantly, with some shipbuilders operating massively below their capacity and facing serious challenges in continuing production,” the association said.
Meanwhile, Global Times reported citing CANSI that With new orders dwindling, shipbuilding companies are facing “severe challenges,” as most companies only have enough orders to keep them busy through 2018. It added that more shipyards will be idle and some will face serious challenges to stay open.
On top of declining orders, domestic shipbuilders also face shrinking profit margins amid intense competition on prices and low utilization of shipyards, the organization said. Rising labor costs might have also hurt the profitability problems of shipbuilders, experts added.
Total first-half revenue for 80 major shipbuilders monitored by the CANSI declined by 11 percent year-on-year 128 billion yuan ($18.96 billion) and total profit dropped 49 percent to 980 million yuan.
In addition, shipbuilders are under heavy cash flow pressures, and they face difficulties raising money because of their weak performance, the CANSI said. “[These issues] have not been fundamentally resolved and the stable development of the shipbuilding industry faces major challenges,” it said.
The lengthy recession of China’s once-sprawling shipbuilding industry will lead to many casualties, experts warned.
In a separate report, Reuters said that European shipbuilders' dominance in the $117 billion passenger ship industry may come under threat as Chinese rivals move into the sector to tap booming local demand for cruise holidays.
China's government has earmarked cruise shipbuilding as a major objective in its "Made in China 2025" programme to upgrade its domestic manufacturing and support jobs at its shipyards, as domestic demand for cruise trips increases 30 percent a year.
This push into the higher-value cruise vessel sector is rattling European yards, leaders in an industry that requires sophisticated supply chains to make and fit out complex luxury liners. Some European shipbuilders fear China could come to dominate the cruise ship market, much as it has done in cargo ships over recent decades.
