Beijing to revitalize shipbuilding sector

It is reported that China’s shipbuilding industry’s revitalization plan has been drafted following the release of support plan for auto industry and is to submit to the State Council for approval. One principal in Zhejiang Development and Reform Commission said that it will strictly control the approval of new shipbuilding facilities and expanding projects in light of the current market downturn.

Zhang Guangqin chairman of China Shipbuilding Association said that the revitalization plan for the sector covers a series of policies arranging from interior demand expanding, finance, tax and scientific research and mapped out a detailed development trend for China’s shipbuilding industry in the coming 3 years.

China will establish development fund and financing & chartering company for the sector to ensure key shipbuilders orders completion and delivery. More science and technology investments would be earmarked to help key enterprises’ industrial upgrading and encourage mergers & acquisitions.

As the third largest shipbuilding country in the world, China is suffering from the huge order losses and cancellations leaving shipbuilders to face the hardest time in history. An official said that domestic shipyards can hardly secure new orders after 2011 due to the contract suspension of European shipping industry impacted by the world financial crisis. That means the international competition will be fiercer in days to come and only the strong companies will survive while those inefficient shipbuilders face an uncertain and precarious future.

According to the statistics from Singapore Pacific Basin Shipping Limited in early 2009, there are 382 new ship orders cancelled worldwide of which China has half, or 20 million DWT. A senior insider said that China’s shipbuilding industry has expanded too quickly and rashly prior to 2008 and the market downturn has helped to squeeze out the weaker players in the sector.

Compared with Japan and Korea, China offers cheap but high quality labour and is rich land resources. Besides, the industry also enjoys the 17% export tax rebates, which help ensure the profit margin in the sector. Statistics show that China’s market share of ship completion, new contracting tonnage and new building order books account for 19%, 42% and 28% of the world’s total volume respectively in the first half of 2008, ranking second in the world.