China: Marine economy boosts shipbuilding industry

According to statistics published by the Ministry of Industry and Information Technology recently, completion volume of China's shipbuilding amounted to 60.21 million DWT in 2012, down 21.4 percent year on year, and new shipbuilding order quantity was 20.41 million DWT, down 43.6 percent year on year. The sharp shrinking, about 20 percent reduction of order completion and more than 40 percent decrease of new orders, reflects the difficulty of the shipbuilding industry in 2012.
As a matter of fact, the shipbuilding industry was the first to feel the chillness in as early as 2008. At that time, with the sluggish global ship market and the impact of the European Debt Crisis, most Chinese shipbuilding companies suffered significant order reduction and price cut. According to the latest statistics published by the Ministry of Industry and Information Technology, as of the end of December 2012, quantity of orders in process was 106.95 million DWT, 28.7 percent lower than that at the end of 2011; of the order, 36 million compensated gross tonnages were seagoing vessels, and export vessels accounted for 82.7 percent of total.
The shipbuilding industry is an important part of the real economy, directly linked to the development of such key industries as iron and steel, petrochemical, equipment manufacturing, and electronic information. In 2012, judging from the development of the 20 major industries of China's real economy, production of raw materials industries, including iron and steel, nonferrous metals, construction materials, and chemicals, remained anemic, overcapacity stood out, and some industries were on the edge of loss. With the impact, as well as the continuous depression of the international shipping market, transaction volume of new ships in the international shipbuilding market has continued to shrink up till now. Besides, a great deal of the orders of China's shipbuilding companies come from Greece and other countries and regions that are heavily stricken by the European Debt Crisis, and the quantity of many company's international orders has dropped sharply.
In 2013, as there are less orders in hand, shipbuilding enterprises will compete more violently for new orders, which would force ship price to go further downward. Although the global economy can be expected to hit the bottom in 2013, excessive shipping capacity may stand in the way of new order recovery. Leading enterprises in China have also felt the huge pressure. In their views, the shipbuilding industry is almost hitting the bottom now; there will be a reshuffle across the industry, and half of the world's shipyards may go bankrupt, shut down, or be merged.
There is still a long way to go before the shipbuilding industrial chain can restore its vitality. Until then, policy support and guidance will be the main driving factors. The central economy work meeting held recently proposed to make full use of the reversed pressure mechanism formed during the international financial crisis to solve the problems of excessive production capacity. It is told that numerous government ministries and commissions are studying and formulating the Action Plan of the Shipbuilding Industry in the Last Three Years (2013-2015) of the 12th Five-year Plan. The government will provide support to key enterprises in such aspects as finance, banking, and tax.
Meanwhile, construction of marine economy demonstration areas across the country will also bring more opportunities to the shipbuilding industry. The publishing of the Development Plan of Shandong Peninsular Blue Economic Zone, Planning of Zhejiang Marine Economy Development Demonstration Area, and Development Plan of Guangdong Marine Economy Comprehensive Experiment Area will vigorously boost the development of China's marine economy and create new opportunities for the development of the shipbuilding industry. Also, the establishment of China Development Bank's Shipping Finance Center is also regarded as a major beneficial factor. It is CDB's first head office business department that provides support to a specific key industry. CDB will make use of this shipping finance center platform, adopt mid- to long-term financing and investment approaches, and give play to the unique advantages of development financing to boost the development of China's shipping and shipbuilding endeavors.
Industrial insiders suggest that the government has made it clear to increase support to the development of key industries during the 12th Five-year Plan, and the prosperity of the marine economy will present new market opportunities for the diversified operation of the shipbuilding industry. Demand mix of China's shipping market is changing, and there will be demands of certain sizes for LNG vessels and marine engineering equipments, eco-friendly vessels and special-purposed vessels, ocean fishing vessels, and large coastal and inland waterway vessels. Shipbuilding enterprises should grasp the opportunity of the bottom adjustment of the industry, improve independent innovation, develop new products that meet market demands, promote industrial reshuffle, and get ready to set sail once again.
Source: CE.cn