Chinese shipbuilders facing choppy seas

China Daily reported that for Chinese shipbuilders this is probably the worst of times and the hardest period has yet to come. Major ship owners both domestic and foreign are expected to go slow on new orders during the next one and a half year as they wait for the global economy to recover. Industry insiders and analysts said the Chinese shipbuilding industry, the largest worldwide would face its real test a few months from now, when a slew of small and medium scale ship builders start to stop production or close down factories and large builders lay off workers and cut salaries.
Ship owners usually order vessels three years before they are put to use. So, the financial crisis, which erupted late last year, actually exerted less of a negative impact on the shipbuilding industry. In fact, the shipping sector was hit more by the slide in foreign trade. Despite a big contraction in new orders and cancellation of earlier orders by international ship owners, Chinese shipbuilders have been working on old orders, and the medium and small players have been limping along due to financial support from the local government. But, as the prospects for the global economy are still looking bleak, shippers are reluctant to book new orders and shipbuilders are starting to get more and more anxious.
Mr Hu Keyi chief engineer at Shanghai Jiangnan Shipyard said "We haven't signed any new deals since late last year, but this is not the worst part. It's hard to predict when the industry would show any positive sign of recovery. Existing orders could help Jiangnan Shipyard limp through to the first half of 2011 but there will be trouble if we still cannot get any new deals by end of this year.”
Mr Sun Liping a shipping analyst from Guotai Jun'an Securities said "The most optimistic thing about the shipping industry now is that it cannot get worse. There is no reason why shippers or ship owners will massively book orders till the end of 2010 and they will probably continue to cancel deals as they did in the first half of this year.”
Mr Tao Ying chief engineer from Waigaoqiao Shipbuilding said "Nobody can understand how we feel at this time we don't see any glimmer of hope looking into the near future, say, one or two years. He said Waigaoqiao has not received any new orders since September 2008 and if the trend continues until early next year, the company would probably start firing workers and chopping salaries.”
This year, China overtook South Korea as the largest shipbuilder but now the nation is staring at overcapacity as a slew of investors aggressively entered the sector during the past few years to cash in on the rapidly growing global trade.