In-depth | CHINA SHIP NEWS


comprehensively; enhanced the centralisation of capital operations; improved risk control capabilities; strived to match key production and operations benchmarks through the delicate management of production processes and to be comparable to Japanese and South Korean players; rearranged production procedures; optimised human resources management and production organisation; unveiled their potential and lowered costs.


Breakthrough achieved in offshore equipment production China’s shipbuilding companies have speeded up their development in offshore equipment manufacturing. A number of advance products have been developed and delivered. Among them are Shanghai Waigaoqiao Shipbuilding’s sixth-generation 3000m deepwater semi-submersible drilling platform, the most advanced vessel of its type in the world; the first 300ft


self-elevating


drilling unit solely designed by a Chinese company - Dalian Shipbuilding Industry Co Ltd; COSCO (Nantong) Shipyard’s self-elevating turbine installation vessel; Shanghai Shipyard Co Ltd’s 3D seismic geophysical vessel; the world’s first 3000m deepwater survey vessel built by CSSC Guangzhou Huangpu Shipbuilding Co Ltd; the world’s first 3000m deepwater pipe-laying crane vessel constructed by Jiangsu Rongsheng Heavy Industries; and the world’s first GPA696 offshore supply vessel built by Zhejiang Shipbuilding Co Ltd etc. Coslpioneer, the deepwater semi-submersible drilling platform by Yantai CIMC Raffles Offshore Ltd for COSL Drilling Europe AS has successfully drilled oil in the North Sea. In 2011, the number of orders for


offshore equipment awarded to China companies increased noticeably. According to statistics, major enterprises, including Shanghai Waigaoqiao Shipbuilding, Dalian Shipbuilding Industry, COSCO (Nantong) Shipyard, Yantai CIMC Raffles Offshore, Shanghai Shipyard Co Ltd and China Merchants Industry Holdings Co Ltd, have won orders for 18 units of offshore equipment, which were worth nearly US$5 billion (excluding offshore support vessels and supply vessels), making up 10% of the total value of offshore equipment


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transferred in the world. Tose offshore equipment orders received by Chinese companies included mainstream products such as self-elevating drilling platforms, semi-submersible drilling platforms and drilling vessels etc.


Issues concerning economic operations In 2011, designated-size* marine related companies in China maintained year-on- year growth of at least 10% to 20% in terms of production value, export value, turnover from core business and total profit, thanks to the booming ship market before the international financial crisis. Chinese shipyards have seized the chance to secure a large number of orders at relatively high prices. Tese orders have helped the sector to achieve higher growth rates in the first half of 2011. However, as production of those low-priced orders sealed after the international financial crisis have commenced in the second half of 2011, the growth rate of production and efficiency benchmarks have shown signs of weakening compared to the same period in 2010.


Monthly orders in hand fall In 2011, Chinese shipyards received new orders of 36.22 million dwt, down 51.9% from the previous year. About one-third of the shipyards surveyed did not receive any new orders. Among the 43 key shipbuilding companies


that were surveyed, two


received no new order. As the completion volume has exceeded the volume of newly received orders for 12 consecutive months, companies’ orders on hand shank month by month. Without adequate orders, some firms have not enough work to do and some have had no new project to start since the first quarter of 2012.


Market demand structure has changed In 2011, the demand structure of the international ship market


changed


significantly. Te demands and prices for bulk carriers and tankers built by Chinese shipyards have dropped rapidly. The shipbuilding sector in South Korea has leveraged on their technology, advantage of product structure and government subsidies etc and won most of the orders for


ultra-large containerships, LNG carriers and large-scale offshore equipment. Shipyards in China mostly rely on the construction of standard vessels. Under the circumstances where the market of standard vessels was weak, Chinese shipyards which rely heavily on bulk vessel business was severely harmed. Te issues of weak R&D capability, slow R&D process and lack of adaptability to the market facing Chinese shipyards are awaiting solutions. At the same time, the international


community has raised their awareness of environmental protection. In recent years the IMO has launched a series of new regulations and new standards, further raising the technical requirements for Chinese shipyards to compete in the international market. Many companies said during the new contract negotiations in 2011, ship owners have showed a greater interest in green ship models that can lower operational costs. Chinese shipyards should accelerate their R&D progress and put more effort into safety and environmental issues.


Proportion of first instalment falls sharply In 2011, the global shipping market continued to be sluggish. Many shipping companies recorded losses and some ship owners had difficulty paying for existing orders. First instalments of new orders have therefore shrunk sharply which has affected the cash flow of shipbuilding companies. Many shipyards had seen their operational cash flow become negative. On the other hand, shipowners become less willing to take delivery of vessels. Requests for delivery delay, change of ship model, and postponing payment have become more common. Banks have also become more cautious when lending to the shipbuilding sector, making it more difficult for shipyards to raise funds and deliver orders.


Ship repair Volumes drop In 2011, Chinese shiprepair yards faced great challenges due to overcapacity as the shipping market continued to decline. Both volumes and prices of normal ship repair and single ship repair businesses have continued to drop. Until the end of December 2011, the 17 major shipyards with repair business in China have only finished repairing 3780 vessels with product value


The Naval Architect May 2012


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