Chinese puzzle

Chinese yards are feeling the effects of the fall in the value of the Japanese and Korean currencies. The year ending July 1 1998 has seen the yen lose almost 22 per cent of its value against the dollar and the won 54.4 per cent. In contrast the yuan has remained unchanged as it is pegged to the dollar.

The Royal Bank of Scotland predicts that over two years the yen will appreciate to 110 to the dollar and the won will recover to 1,000 to the dollar. Therefore it is not surprising that both Japanese and Korean shipbuilders are using this time to fill their orderbooks. The bank believes China will devalue the yuan sooner or later, but has no forecast of when, or by how much.

Charlie Foo, former chief representative in China for Lloyd`s Register (now retired) said two years ago that Chinese yards needed to maintain their price advantage to prevent owners going to Japan, where the quality is better. This appears to have come true, as Chinese yards have seen orders dry up this year and many are trying to fill slots for deliveries from mid- to late 1999 onwards. Many CSSC yards say that smaller Chinese yards have been winning export orders at prices they cannot match. And still new yards are being constructed with three (Nantong, Waigaoqiao and Yantai) having drydocks of over 250,000 dwt capacity.