Walking Between Ice and Fire

Reporter Xing Dan

Walking Between Ice and Fire

Reporter Xing Dan

With an obvious climbing up of ship orders in 2013, China shipbuilding industry finally feels a hint of warmth after having experienced frosts for a long time. However, behind this“early warm spring”, is this the opportunity of renaissance for shipping enterprises or the torture hidden under the bright surface? Has the spring come for the shipbuilding industry? Shipyards are full of desire and fear like walking between ice and fi re.Many shipyards dare not expect too much, just wanting to survive until the spring comes.

The shadow behind the orders

Compared with order shortage in 2012, it becomes better in the year of 2013 for many shipyards. This is the overall feeling of our reporter after interviewing many shipbuilding enterprises. Nie Lijuan, Deputy Secretary General of China Shipbuilding Industry Association analyzed that apart from stable rise of normal ship types, there is a great adjustment in product structure with orders for high value-added ships increasing in this “early spring”, such as the quantity of offshore engineering orders in the first half of this year is equivalent to that of the last whole year.

Increasing ship orders should be a good thing, but many shipyards are still worrying and are not optimistic towards the future market. After many interviews by our reporter, it’s learned that the current increase of ship orders is achieved by shipbuilding enterprises on the basis of squeezing profit and offering preferential payment clause in order to maintain the rate of operation, rather than the release of market demands.

Someone is happy while someone is worrying

Despite that the low price makes the warm early spring for orders less attractive, there are still some shipbuilding enterprises which can achieve good income depending on their highly eff i cient management,research in high technology and high value-added products even when many shipbuilding enterprises are prof i ting at a very low level or even operating at a loss. The north and south shipbuilding groups which frequently win high-end ship orders are such examples.

Depending on their unique technique, some private enterprises show good momentum of development. Nie Lijuan, Deputy Secretary General of CNASI said that,the shipbuilding industry is a subdivided market, and enterprises must find their own positions, especially for those medium and small-sized shipyards. These shipyards must have their own characteristics, and can build different ships with accuracy, expertise,uniqueness and superior quality, and this is the right way for them to go.

Someone is happy and definitely someone else is worrying. At present, the most optimistic expectation is that shipping market will not turn around the corner until 2014, therefore, it would be at least two years before the situation for upstream shipbuilding industry with excessive capacity could improve. During this period, half of the world’s shipyards will go bankruptcy or shut down. Experts predicted that with supporting policies in China favoring backbone enterprises and banks tightening loans, and under the circumstance that many ship orders flow to state-owned and largescale private shipyards, the situation for medium and small size shipyards which enter the market at a later time with low R & D capability, insuff i cient fi nance and bulk carrier as their single ship type, would be more worrisome.

Self-salvation before dawn

Some private shipbuilders are full of expectations for the future of shipbuilding market, but they still remain cautious about the current situation. They believe that,in the near future, the world shipping and shipbuilding market will continue to wander in the slump, and this would become even worse in a certain period. The recovery will come after at least 3-5 year’s adjustment period. However, how can shipbuilding enterprises survive in such hard time?

First of all, the measures of the north and south shipbuilding groups indicate that, they on the one hand are speeding up their pace in merger and reorganization and structural adjustment, and continuously increasing investment in research and development; on the other hand they accelerate transformation of enterprises towards diversified development. There are various methods and strategies for private shipyards to rescue themselves from the crisis, and the situation they would face is far more serious. At present, although many shipbuilding enterprises collapsed and shut down in China, there’s no making without breaking, we have seen a number of strong ones appearing in the sluggish market after the baptism of the market. They gradually begin to cut a figure in the field of high-tech and high value-added ships while maintaining the market for regular ships. And these shipbuilding enterprises will be indeed the backbone for China to become the shipbuilding power in the future.