Business / Industries

Smaller shipyards to be put into drydock

By Zhong Nan (China Daily) Updated: 2014-03-21 10:18

Smaller shipyards to be put into drydock

As the world's largest shipbuilding country, China has 1,600 shipbuilding-related enterprises (including 800 large shipyards), with an annual industrial output value of 800 billion yuan ($130 billion).

A total of 1.5 million people work in the industry, according to the National Development and Reform Commission.

New orders hit 69.84 million deadweight tons in 2013, up 242 percent from a year earlier.

Ongoing orders totaled 131 million DWT, a 23 percent rise year-on-year.

"Even though China received more orders than Japan or South Korea last year and this year, new ship prices hit rock bottom over the past two years, and there is no sign of recovery," said Zhang Guangqin, president of China Association of the National Shipbuilding Industry. "It will take another five years for overcapacity to be eased."

Concrete action already has been taken by major shipbuilding provinces. Shanghai announced earlier this month that it will cut its shipbuilding capacity to 12 million DWT before 2017.

Jiangsu also promised to cut 10 million DWT of shipbuilding capacity, down to 25 million DWT over the next five years.

In the meantime, the development and reform commission of Zhejiang province is drafting a plan to consolidate large shipyards and eliminate small and low-end shipyards within five years.

The province is eager to optimize all its resources to develop high-end vessels and offshore engineering products such as liquefied natural gas carriers, drilling vessels, large icebreakers and chemical tankers.

Dong Liwan, a professor at Shanghai Maritime University, said the Crimea issue between Russia and the West will create an opportunity for Chinese shipyards to get orders from Europe for LNG carriers.

"Russia may cut its natural gas supply to some members of the European Union if the conflict in Crimea continues to escalate. Therefore, countries such as Britain, Germany and Italy will turn to theirshale gas-rich ally the United States to resolve a possible energy crisis sooner or later," Dong said.

The world's LNG ship market is dominated by South Korea, Japan and China. South Korea became the world's largest LNG vessel manufacturer last year, holding 68 percent of global orders. But its production capacity is already saturated.

Japan faces the similar problem of currently producing LNG ships for domestic companies to secure its natural gas supply on sea routes, after the nuclear leak in Fukushima in 2011.

"Under such circumstances, those European nations have no choice but to order a considerable number of LNG ships from China to ensure they can get sufficient gas from a seller across the Atlantic," said Dong. "LNG ships also are a good product with which China can upgrade its shipbuilding sector."

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