China’s shipbuilders go from boom to rust

Until last year the Yangzhou Guoyu Shipbuilding Company was a bustling village of 6000 workers striving to fulfil worldwide orders for new ships.

Today, in a scene repeated across China’s industrial heartlands, the yard stands silent but for the howling of stray dogs around its deserted docks. Outside the closed gates is a ghost town of abandoned workers’ dormitories, closed restaurants and crumbling internet cafes.

Much of Yizheng’s 27km stretch along the Yangtze’s northern bank 320km upriver from Shanghai is now a wasteland, where idle cranes loom half-seen through choking grey haze.

Unfinished hulks of ships are left to rust.

“The yard had been open for so many years. There seemed no way that it could all fall apart so quickly,” said Chen Caihong, one of thousands of workers who flocked here a decade ago to join China’s latest manufacturing boom. Mr Chen was laid off last year, joining tens of thousands of Chinese shipbuilding workers being sacked amid a global crash in shipping. And the downturn is far from over.

The government has warned that almost one-third of the country’s remaining shipyards must close as Beijing wrestles with overcapacity in a range of heavy industries.

Shipbuilding became a symbol of China’s industrial might in the early 2000s, when Beijing vowed to transform its modest shipbuilding sector into the world’s largest producer by 2015 — then did it five years ahead of plan.

But China’s rise to pre-eminence coincided with a slump in global trade that gutted demand for new container ships, oil tankers and bulk carriers used for transporting commodities, just as a glut of new orders placed by over-bullish shipping lines was flooding the market.

In 2015, Premier Li Keqiang identified shipbuilding as one of the heavy industries on which he said China must “ruthlessly bring down the knife” to eliminate overcapacity.

The result is that China’s private sector shipyards have been virtually wiped from the map, while Beijing is keeping only the most viable state-run yards alive with subsidies.

“China has been very badly caught out,” said Robert Willmington, a shipbuilding analyst with IHS Maritime & Trade. A large bulk carrier was worth $US110 million ($144m) at the peak of the market; now it would fetch only $US45m, he said.

Chinese shipyards capable of building large ocean-going vessels have roughly halved in number since 2013 to about 70, he said, while hundreds of smaller shipyards have gone bust.

China, South Korea and Japan between them built almost all the world’s ships, and they were all suffering from a global slump that may not end until 2019, Mr Willmington said.

China’s rise and fall had been especially violent, he noted, with a much smaller, state-dominated industry now set to emerge from a sector that once welcomed private enterprise.

Mr Chen, a qualified shipbuilding engineer, said he earned 8000 yuan a month — around $1500 today, and three times as much as China’s migrant workers earn on average — during the golden years.

A 45-year-old native of Jiujiang 500km to the southwest, Mr Chen recalled migrating to Yizheng when shipbuilding jobs were plentiful.

Mr Chen now gets by with irregular work at a logistics firm. “I’ve called 10 or 20 shipyards, but they all said they don’t need ­people,” he said.

Thousands of other migrants drawn to Yizheng by abundant shipbuilding jobs have drifted away, depressing local businesses, according to residents.

A few kilometres upriver, the private Yizheng Xinyang Shipbuilding Company built 10 ships last year, down from 40 a few years ago, said Wu Qing, a yard manager with the company.

“Just breaking even is our goal now,” said Mr Wu.

“If we can feed our employees and stay afloat, that’s already something. We have to keep using the heavy equipment — it will rot if we don’t.”

Industry analysts estimate China’s shipbuilding workforce still numbers over half a million people at hundreds of yards.

Beijing has tried to cushion shipbuilding’s collapse. The Export-Import Bank of China has approved over $US25bn in shipbuilding finance since 2013, equivalent to a third of all China’s overseas orders. Orders fell again by a third in 2016, according to the China Association of the National Shipbuilding Industry.

Li Dong, co-director of the Ministry of Industry and Information Technology, said in October that 30 per cent more shipyards would be axed on top of the 20 per cent that have dis­appeared so far.
Source: Wall Street Journal