Challenges pile up for China?s shipyards

Zhang Guangqin, chairman of the China Association of the National Shipbuilding Industry (CANSI), has emphasized that the domestic shipping sector in China faces many formidable challenges. Chinese shipbuilders have to face escalating raw material and labour costs. In addition, it will be hard for China’s shipbuilders to win European orders after 2011 mainly because the US subprime mortgage crisis has stopped shipping companies and institutions of Europe entering into new contracts.

Shipbuilding is regarded as a capital-intensive industry, so more problems and difficulties will be encountered over the profitability and capital chain of China’s shipping industry in the next few years if it does not innovate in business, shipbuilding, and marketing, predicted the China Development Bank CIO Hu Bengang.

Meanwhile, the domestic shipbuilders, especially the small- and medium-sized ones, are handicapped by insufficient working capital and will need to urgently seek new avenues of financing. Chen Qiang, chairman and president for Jiangsu Rongsheng Heavy Industries Group Co., Ltd., a private shipbuilding firm in Southeast China, predicts that the nation’s shipbuilders suffered reductions in their gross profit margins in the first half of 2008 due to continuous appreciation of the renminbi and the tight shipbuilding steel plate supply.