In-depth | CHINA SHIP NEWS


to the development of China’s shipbuilding industry, the exploration of marine resources and the protection of rights over the ocean. Shanghai Merchant Ship Design &


Research Institute (SDARI) has achieved a breakthrough in the research and development of high-tech vessels through winning a contract for the basic and detailed designs of a 30,000m3


LNG tanker. In addition, a breakthrough has been


achieved in marine engineering equipment development with national policy support. In the first-half, China’s shipbuilding enterprises have followed the mid-Long- term development plan for the marine engineering equipment sector closely, speeding up the development of the marine equipment industry and delivering a batch of advanced products, while acquiring a number of new orders. Cosco (Nantong) Shipyard Company


Limited has delivered its second circular drilling rig. Yantai CIMC Raffles Offshore Limited has delivered a semi-submersible drilling platform; and has won an order for a semi-submersible drilling rig from a Norwegian owner. Shanghai Waigaoqiao Shipbuilding Company Limited has won an order for a jack-up rig from CNPC Offshore Engineering Company Limited. China Merchants Heavy Industry (Shenzhen) Company limited has received an order for a jack-up rig by Jack-Up Barge B.V. from the Netherlands. Cosco (Nantong) Shipyard Company Limited and Cosco (Guangdong) Shipyard Company Limited have won orders for three tender assist drilling rigs from foreign shipowners. Chengxi Shipyard (Guangzhou)


Company Limited has signed a contract for the conversion of an FPSO. Wison Offshore & Marine Limited has won a contract for the engineering, procurement, construction, installation and commissioning of a set of floating LNG liquefaction, regasification and storage unit from Belgium’s Exmar. In the field of offshore engineering,


Chinese shipyards have yielded relatively high rewards. CSSC Guangzhou Huangpu Shipbuilding Company Limited has contracted with Offshore Oil Engineering Company Limited to build China’s first 3,000m multi-purpose offshore support vessel, Hai Yang Shi You-286. Dalian Shipbuilding Heavy Industry


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Company Limited has won orders for two semi-submersible residential platforms from Norway’s Sirius Offshore Accommodation. Cosco (Nantong) Shipyard has received


an order for an offshore wind turbine installation unit from Denmark’s A2SEA. According to initial estimations, China’s shipbuilding enterprises have signed more than US$2 billion worth of new contracts for offshore equipment in the first-half of the year.


Management strengthened and risk resilience increased A continuously weak ship market has brought new challenges to shipbuilding companies. China’s shipbuilding enterprises have adjusted their operational strategies proactively, applied more stringent control over risks, located opportunities via refined segmentation, and have attained a breakthrough in terms of volume of new orders for high-tech vessels and offshore engineering equipment. Against the backdrop of weak demand,


shipbuilding enterprises must streamline their construction solutions, balance resource distribution, realise savings plans, raise production efficiency, focus on matching the new PSPC regulations, and ultimately apply rigorous control over construction and quality management, in order to manage the any risk PSPC may bring to shipyards. Facing falling ship prices and rising costs, shipbuilding enterprises must strengthen their control over cash flow and internal management, establish cost control mechanisms, standardise debt management and strengthen the centralisation of cash flow management, so as to enhance risk control capability.


Shipyards face inadequate market demand In January-June, new deliveries remained slow and Chinese shipyards have only received orders totalling 10.74 million dwt, amounting to only 33% of the volume of new vessels completed in the same period of time. Meanwhile, hit by a weak demand in


the dry bulk ship market, cancellation volume has risen. In the first-half, there were 41 cancellations in China totalling 2.58 million dwt, amounting to 1.3 times


of the total cancellation volume of the full year of 2011. Te volume of new vessel transactions has been lower than new ship completion volumes for 18 consecutive months, following a sharp drop in orders to Chinese shipyards. As of the end of June, orders in hand


at Chinese shipyards amounted to 125.87 million dwt which is not enough for full operations in all shipyards. According to estimates based on orders in hand, the majority of shipyards do not have enough orders for full operations in 2013 and some cannot guarantee full operations in the second half of this year.


Delivery becomes a challenge As the shipping market remained weak and shipowners have sustained continuing losses, the difficulties of delivery that used to affect mainly mid- to small-sized shipyards have spread to the major shipyards. Tere were increasing numbers of


requests


from shipowners for changes on design, amendments of contractual deadlines, stricter surveys and ship price adjustments. With various new international standards being implemented, new ship deliveries have become more difficult. Delays in delivery have increased as some shipyards have applied a rather loose management style, thorough a lack of understanding of international standards the yards could not accommodate more stringent requirements from shipowners.


Shipyards face cash flow problems Banks have tightened credit as a result of the global financial crisis, making it more difficult for shipowners to raise funds. Tis has meant that the amount of first instalment payments has dropped from 40% of the total ship price to 10%. As the proportion of payments made in a later stage of production has risen, enterprises are facing more serious cash flow problems. According to statistics, in the first five months of this year, shipbuilding companies’ account


receivables have


climbed 26.6% from the same period last year; debts have risen 9.5% year-on- year; interest payments have increased 43% year-on-year; and financial fees have surged 77% year-on-year.


The Naval Architect October 2012


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