Beijing adopts selective lending to force shipyard consolidation
Time：2014-12-09
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The number of shipyards had fallen to about 1,600 from more than 3,000 in 2012, Guo Dacheng, the president of the China Association of the National Shipbuilding Industry, said at an industry event last week.
About half of those left – 815 yards – had capacity of 300,000 dwt, a threshold of meaningful scale as modern cargo ships grow larger.
Of those 815, only 82 received new orders last year, and only 60 received financing from the Export-Import Bank of China, a policy bank with a state mandate to fund exports of mainland-built vessels.
Shipbuilding is one of the most oversupplied industries in the mainland economy and is a frequent target of Beijing’s efforts to mothball excess capacity. The other sectors include steel, cement and electrolytic aluminium.
The latest call came in September when the Ministry of Industry and Information Technology released a “white list” of 51 shipyards eligible for further preferential policy treatment such as financing from the Exim Bank.
A second batch, containing 20 shipyards, would be announced soon, Guo said at the Exim Bank biennial ship finance forum in Beijing on Friday.
Export credit has helped drive a wedge between the good and bad players. Li Zhongyuan, a general manager of the bank’s transport finance department, said credit extended to the best 21 shipyards accounted for 80 per cent of its US$3 billion portfolio.
That included various offshoots of state-owned China Shipbuilding Industry Corp and China State Shipbuilding Corp, and bellwethers in the private sector such as Singapore-listed Yangzijiang Shipbuilding, Sinopacifc Shipbuilding and Jiangsu New Times, Li said.
“The [selective] financing is a tragedy for shipyards with incompetent capacity, but gospel for the competitive ones,” he said.
The mainland is the world’s biggest shipbuilder by volume, followed by South Korea and Japan. In the first 10 months of this year, more than half of the world’s new ship orders were placed on the mainland and a third of new vessels launched were built on the mainland, data from the industry association shows.
But mainland shipbuilders still sit at the lower end of the value chain, compared with their South Korean rivals, which are renowned for building large offshore drilling rigs and floaters and liquefied natural gas carriers.
Profitability remains challenging. Association data shows the top-tier mainland shipyards recorded 240 billion yuan (HK$302 billion) in revenue in the first 10 months of the year, but eked out only 4.3 billion yuan in profit in the same period.