China Shipyards Should Delay Bid to Pass Korea, Clarkson Says

China should delay its bid to pass South Korea as the world’s biggest shipbuilder to prevent a flood of new vessels extending industrywide losses, said Clarkson Plc’s Managing Director Martin Stopford. “This sort of target really should be put aside for the time being,” he said in an interview yesterday at a conference in Shanghai. “We’re in a very serious situation.”
China has asked state banks to boost financing for new ships to prevent order cancellations, safeguard jobs and support a plan to pass South Korea in ship production by 2015. At the same time, the global container-ship fleet has as much as 20 percent excess capacity, according to Stopford, which has worsened a slump in rates amid the global recession.
“There’s a problem of overcapacity for both the shipbuilding and shipping industries,” said Zhang Shengkun, president of trade association Shanghai Society of Naval Architects & Marine Engineers. “That makes the situation really severe.”
Chinese shipbuilders may face excess capacity from about 2011, once the current backlog of orders is completed, Zhu Hongren, chief engineer at the Ministry of Industry and Information Technology, said earlier this week.
The government plans to announce new rules to encourage shipbuilding mergers before the end of the year to boost the competitiveness of the domestic industry, Zhu said. The program will also help shipyards access credit and encourage shipping lines to replace older vessels to revive orders, he said.
Orders Slump
China’s new-ship orders fell 63 percent in the first 10 months to 19.1 million deadweight tons, according to the industry ministry. The nation’s backlog fell 8 percent in the period.
South Korea has committed 400 billion won ($346 million) to help shipping lines pay for new vessels. It may also expand funding to cover under-construction ships.
China delivered 20 percent of new vessels worldwide in 2008, and it held 33 percent of the global order book as of November, according to Clarkson.
“A little patience in the interest of stability” would help the industry, Stopford said. “We all think that China’s going to get there in due course.”