China matches sophistication with price

China?s shipping and shipbuilding industries are benefiting from sweeping reforms of state enterprises, increased foreign investment and technical assistance.

Plans for China to join the World Trade Organisation is likely to accelerate the pace of economic reform in the country. In due course, further liberalisation within the Chinese economic and industrial system is expected to pave the way for more joint ventures between shipping companies and shipyards in China and those overseas.

To take advantage of the fast growing Chinese economy, shipbuilding concerns within China ? still largely held within the China State Shipbuilding Corporation (CSSC) ? will be amalgamated into larger production units.

In due course, given an on-going stable economic situation in China, the most successful yards are also likely to be floated on the stock market. The Jiangnan and Hudong shipyards have already been identified as likely candidates.

The ongoing reorganisation of CSSC is part of a wide-ranging review of the operation of government ministries and state-owned enterprises. Consisting of in excess of 20 large and medium size shipyards, marine equipment suppliers and R&D centres and trading organisations, CSSC remains responsible for around half of shipbuilding production in China.

In 1998, sales by CSSC approached the $3 billion mark, of which around 80 per cent was accounted for by ship sales. The strategy for the reorganisation of the yards within the CSSC group is still evolving, but most recently it has been suggested that CSSC will be re-structured into two large groups.

According to a report from the Xinhua News Agency, the first of the new groups, which will include the Shanghai Shipbuilding Industrial Corporation, will be known as China Shipbuilding Industrial Group Corporation; the second, which will include the Dalian shipyards, will be known as the China Shipbuilding Heavy Industries Group Corporation.

Diverse newbuildings

The past 12-18 months have been notable for both the number and variety of newbuildings ordered from Chinese shipyards, which are attracting ever greater numbers of orders from Greek, German, Swedish, Norwegian, Danish and other shipowners.

Regarded hitherto as a source of inexpensive, yet unsophisticated tonnage, Chinese yards have recently received orders for numerous much more complex vessels. These include VLCCs, ropax ships, post-panamax container ships, and semi-submersible heavy lift ships.

Gaining experience quickly, Chinese yards are now successfully targeting newbuilding contracts for ships as diverse as oil tankers, chemical tankers, roros, dry bulk, and larger container ships. In the longer term, Chinese yards also have ambitions in the market for gas carriers and are developing expertise in LPG technology.

At the same time, a number of smaller, technically less advanced Chinese yards have benefited from last year?s spate of orders for handymax and panamax bulk carriers, while German owners have singled out Chinese yards for smaller container ships.

Yards such as Hudong and Jiangnan are already well known for their ability to build such vessels, but have been joined in this sector of the market by numerous others.

In many cases, the same yards are able to combine the advantages of comparatively low overheads and wages and newly built, well laid out shipbuilding facilities, while others are prepared to build new, larger facilities against firm contracts in order to gain a toehold in the market.