Since the beginning of the year, financial
institutions have tightened credit and it has become harder for shipbuilding companies, especially small and medium-sized yards, to obtain financing and prepayment guarantees. Some shipyards were unable to accept new orders because the financing was unobtainable. In addition the ship prices of the three
major ship types built by Chinese shipyards have continued to fall amidst a stagnant market. Shipyards have been receiving orders that brought negative gross profits as ship prices keep falling while costs keep increasing. Based on statistics, in the first five months of the year, the income from the core business of the shipbuilding sector has edged up by 5.3% from the same period last year; however, the cost related to the core business has risen by 7.2%, a growth that is 1.9% higher than the increase in core business income. Profit margins are only 4.77%, down 30.7% from the same period last year. The number of loss-making enterprises climbed to 347 with total losses made increasing by 62.9%. Small- and mid-sized firms are facing severe challenges; bankruptcies and lay-offs have become more common.
Market forecasts According to experts, the imbalance between demand and supply in the global ship market will be difficult to solve and that the market will continue to be slow meaning that the chances for a rebound in demand in the short term are slim. Te same experts say global demand for different types of new ships has changed compared to last year. Despite the transactions for bulk carriers remaining sluggish, bulk vessel transactions still made up the largest portion of the market. While transactions of oil tankers has bounced back slightly; transactions for ship types that are related to oil and gas exploration and transport such as gas tankers, drilling rigs, production rigs and offshore support vessels has become more active. However, the containership market, especially that of the ultra-large box vessels, remains very weak. China’s ship market has seen structural
changes in demands. It is expected that there will be considerable demand for LNG tankers, offshore engineering equipment,
The Naval Architect October 2012
energy-saving green ships, specialised vessels, deepwater fishing vessels, fisheries administration ship, and coastal and large-scale inland river vessels.
Policy suggestions First of all, companies must promote more economical, energy efficient and thereby environmentally friendly ship models through all means. It is suggested that tailored marketing strategies should be applied to different shipowners via various channels. Companies must collect market information from a wider network to win every possible order. Companies must also seek new clients,
while companies continue to bolster their relationship with existing customers they should also build relations with new clients via vertical cooperation in order to seize the opportunities brought by the construction of China’s national deepsea fleets, the exploration of the South China Sea and marine rights protection. Shipyards should proactively fight for orders from Chinese energy enterprises, leasing companies and fund management companies. Furthermore, companies must
seize the opportunity arising from the structural changes in the international shipping market. Companies should strive to win orders for VLCCs, LNG tankers, containerships of more than 10,000TEU, offshore engineering equipment, fisheries administration ships and specialised vessels.
Quality control Shipbuilding enterprises need to stick to the technical standards and treat contract requirements seriously, while at the same time communicate with shipowners in a proactive manner and strengthen the control over the production process to ensure construction quality. Shipyards must emphasise the need for quality accessories and improve their quality control capabilities and the quality of their products, in order to avoid late deliveries due to quality issues. Related government departments must
also apply more resources to support research and development projects for shipbuilding enterprises; guide companies to upgrade their product portfolio to include more sophisticated ship types; help
companies to build their own brands and encourage merger and acquisition between shipyards to streamline production capacity and eliminate outdated production lines. Tis will allow resources to be allocated to the most competitive players and ease overcapacity while accelerating the restructuring of the sector. Shipbuilding enterprises must also
maintain a tight grip on the front-line market and seize the opportunities arising from the
replacement and
upgrade of major ship types in the market. Companies should focus on research and development of various ship types including environmentally friendly, energy efficient green ships and offshore engineering equipment, so as to match the changing demands for different products.
Controlling cost efficiency As ship prices have fallen close to shipbuilding cost levels, cost control is the key to reducing losses and making a profit. Shipbuilding companies must fine-tune their operational strategies to enhance the competitiveness of their products in terms of quality, function, price, payment method, construction period, and financing arrangements; and to apply stringent risk controls.
Reducing production pressure Shipbuilding is a cyclical industry. During a market downturn, shipyards have to strengthen their core business through product upgrades, on the one hand while mid-sized companies and big enterprises have to work together to achieve business diversification on the other. Sizeable companies should leverage their strong capital advantages to reduce risk through vertical and horizontal expansion. During the12th Five-year Plan period (2011-2015),
the government
will strengthen its support to major industries, such as marine, new energy, new materials, mechanical engineering, logistics, energy saving and green industry, rail
transport equipment, intelligent
manufacturing equipment and new power battery material etc, providing further opportunities for shipbuilding enterprises to diversify their
businesses.NA
29
In-depth
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72