China: Shipbuilding industry far from recovery

China's shipbuilding industry, which ranks second in the world in terms of tonnage and number of vessels built, will continue to struggle due to the global recession, even if new orders increase in the second half of this year, said experts at a forum held in Beijing yesterday. China's shipbuilding industry has deteriorated since last September as new orders shrank and vessel prices dropped, said Wang Rong, an official at the Ministry of Industry and Information Technology (MIIT).
The country's shipbuilders received 7.87 million deadweight tons (DWT) of new orders in the first seven months of the year, a decrease of 78 percent year-on-year, according to statistics from the MITT.
Meanwhile, orders of 75 vessels, or 3.88 DWT, were canceled during the same period, about 2 percent of the industry's total current orders as of the end of July, said the ministry.
The price of vessels also plunged due to declining demand of new ships, said Wang Wenjun, deputy director of the Economic Research Center within China State Shipbuilding Corporation (CSSC).
The average price of ships has dropped more than 20 percent during the past year.
For example, the price of a Very Large Crude Carrier was 114 million yuan ($16.69 million) in August, down 24 percent compared with a year earlier.
The price of bulk carriers with a loading capacity of 80,000 tons decreased by 28 percent, and the price of container ships dropped by 35 percent.
Wang said the domestic shipbuilding industry also faces problems such as financing difficulties and overcapacity.
The shipbuilding industry has developed very quickly over the past three years, reaching a production capacity of 66 million tons, a number that is expected to rise to 80-90 million tons in 2010, said Huang Pingtao, Chairman of the Chinese Society of Naval Architects and Marine Engineers.
CSSC, one of the largest shipbuilders in the country, reached a production capacity of 54 million tons in 2008, making up 8.7 percent of total global shipbuilding capacity.
The government has been proactive in addressing the industries problems.
"A stimulus plan issued February by the State Council for the shipping industry will help Chinese shipbuilding companies recover from the downturn more quickly," said Huang of Chinese Society of Naval Architects and Marine Engineers.
The plan also said that China might become the global shipuilding leader by the 2015.
"As China's economy recovers, there will be batches of new orders. However, since it is unlikely that the global market will bounce back soon, the most difficult period for the shipuilding industry will emerge around 2011, when companies' production is under capacity," said Wang of he Economic Research Center within CSSC.
"Even if the world economy gradually recovers next year, new orders are unlikely to reach previous highs," Wang added.