Chinese shipyards facing a capacity glut

China, the world’s second- biggest shipbuilding nation, will face a capacity glut from 2011 after yards work through existing orders and shipping lines slow new orders, according to a government official.

Insufficient demand will be a ‘major problem’ for as long as three years, Zhu Hongren, the Ministry of Industry and Information Technology’s chief engineer, said yesterday at a conference in China. Global shipbuilding capacity will rise to 200 million deadweight tons annually in the next few years, while demand will struggle to reach the 156 million tonnes it averaged over the past six years, Zhu said.

China plans to announce new rules to encourage shipbuilding mergers before the end of the year to pare down growth in the industry. By 2015, China’s ten biggest shipbuilders will account for more than 70% of all vessels built in the nation, rising from 53% last year, Zhu said.

China will also help shipyards access credit and encourage shipping lines to replace older vessels to help the shipbuilding industry, he said.