Tuesday, August 20, 2013

China Poised to Gain Control as Shipyard Shakeout Looms - Bloomberg

China Poised to Gain Control as Shipyard Shakeout Looms - Bloomberg | China grew into the world's leading shipbuilder over the last decade as hundreds of private yards opened to compete with state-run companies. Now, the government is poised to regain control as the industry heads for consolidation. The number of shipyards in China has swollen to 1,647, contributing to a global capacity glut. To stabilize the industry, one third to a half of the yards will probably have to disappear through acquisitions and closings, according to executives and analysts. State-run companies are at an advantage because they have easier access to credit to pay workers, buy raw materials and provide financing for clients. China State Shipbuilding Corp., China Shipbuilding Industry Corp. and other government-backed companies won three-quarters of all orders in the first half of this year. Though state companies may buy some private yards, many will likely have to close since their capacity isn't needed. "It's a lost cause for most of the private shipyards," said Park Moo Hyun, an analyst at E*Trade Securities Korea in Seoul. "The government and even the banks seem to have given up on trying to save some of the troubled private shipyards. What innovations can they come up with when they can't pay to keep their workers?" ... More than half of China's yards will have to be wound down to cut capacity, according to Ren Yuanlin, chairman of Yangzijiang Shipbuilding Holdings Ltd. (YZJSGD), the country's second-largest private vessel maker. Of the remainder, only 20 percent will be profitable, he said. China Association of the National Shipbuilding Industry said last month a third of the nation's yards face the danger of closure in about five years after failing to win orders.