The shipbuilding industry's prospects are even worse than in the immediate aftermath of the 2008 financial crisis, Hu Keyi, chief engineer at Jiangnan Shipyard Co, said recently.
"This year's ship market is bleak, mainly due to a shortage of orders," Hu said. He pointed out another contributing factor was that it is a buyers' market, and as such more are requiring sellers to take out loans on their behalf as part of the purchase agreement.
In the depressed environment, shipyards frequently refresh the price low. China Newbuilding Price Index (CNPI), dry bulk vessel price index CNDPI, container index CNCPI and tanker index CNTPI all see different degrees of declines recently.
Newbuilds resale is getting active recently, distracting some buyers’ attention off newbuilding market. Besides, the appreciation of Japanese Yen is boosting the secondhand transactions, further depressing the newbuilding market. Shipbuilders have to offer lower prices and more preferential payment conditions to draw more buyers.
The deterioration of European debt crisis had pushed more local banks close their business for ship financing, deterring some shipowners from investing in newbuilding market.
As one of the outstanding shipyards in China, Yangzijiang shipyards has secured newbuilding contract for seven vessels in 2012, including four 82,000dwt bulkers, two 95,000dwt bulkers and one 47,500dwt bulker. The total contact value came up to $206.2 million. However, the performance is still far away from its annual target of $2.0 billion to $2.5 billion.
The offshore market is still the hottest section in newbuilding market. Chinese shipyards will have to adjust its strategy and try to develop semi-submersible vessels, drilling ships and other offshore plants on the basis of strengthening traditional ship types.
However, the new sectors are all capital-intensive and need more financial support from the government.
However, despite the poor outlook, industry insiders say they will not expect consolidations in the industry or widespread collapse of ship builders.
Recently, Sinopacific Shipbuilding Group Co., Ltd. signed a joint-development agreement with Mitsubishi Heavy Industries, Ltd. (MHI) under which MHI will provide technological support to Sinopacific in the area of commercial vessel construction. Japan’s shipbuilding industry is now confronting even more severe conditions and some shipbuilders have chosen to share or transfer their core building technology by cooperation. Maybe it is a good opportunity for Chinese shipbuilders to fulfill its goal to lead global shipbuilding.