cri-report-According to statistics a few days ago, the new order volume globally was 5.19 million deadweight tons in December 2012, sharply rising by 198% MOM but declining by 17% YOY. In the whole year of 2012, the total new order volume globally was 45.48 million deadweight tons, dropping by 47% YOY, indicating that the overall recovery in ships still takes some time. Looking ahead to 2013, the development of the shipbuilding industry still faces some challenges:

Shipbuilding industry to face “3 challenges”

It is revealed by China Association of National Shipbuilding Industry that, the current shipbuilding completion volume has surpassed the new order volume in the corresponding period for 12 consecutive months. In shipyards included in the statistics, 1/3 of the enterprises receive no orders.

In addition, due to the sharp decline in high-priced ships in currently-delivered ships, rise in costs of labor, raw material, etc., appreciation of RMB exchange rate, etc., the above-mentioned situation does not significantly improve.

It is reported that, orders of China’s shipbuilding enterprises are mainly from Greece and other areas hard hit by the European debt crisis. Influenced by the downtown in the shipping market and continuous operation loss of ship owners, the difficult ship delivery phenomenon spreads from small to medium-sized shipyards to backbone shipyards. Because of ship owners’ increasing requirements for design change, contract period change, strict examination, ship price adjustment, etc. as well as successive implementation of new standards and regulations internationally, the ship delivery is increasingly difficult. Due to the extensive management, inadequate understanding of regulations and standards and inconsistency with ship owners’ stringent requirements of some enterprises, the ship delivery difficulty obviously rises and the ship delivery delay situation increases. (http://www.cri-report.com/logistics-shipping/9834-research-report-on-china-s-shipbuilding-industry-2013-2017.html)

As ship owners are not willing to take delivery of ships, the stranded payment for goods is hard to be regained, and enterprises also undertake the high dock, labor and financial costs, causing the decline in main economic indicators of the shipbuilding industry which must accept the “profit difficulty” after the past “difficulties in ship delivery and order receiving”.

Continuously slow recovery in macro economy at home and abroad

The shipbuilding industry is an important part of the real economy. China’s shipbuilding enterprises which mainly rely on overseas markets are deeply influenced by international economic environment.

In 2013, the global economy is still in an adjustment period after the financial crisis, with many complex and uncertain factors in international environment; the operation of domestic economy is obviously expected to steadily rebound, but the original competitive edges and growth impetus gradually weaken.

Influenced by the slow recovery in the global economy, the ocean shipping market is continuously in downturn. In 2012, China’s export of ships declined, and the three main shipbuilding indicators sharply declined YOY. The shipbuilding completion volume was expected to be 58 million deadweight tons, falling by 24.3% YOY. In 2013, the newly-added shipbuilding demand is predicted to still sharply drop, and China’s shipbuilding completion volume will still present the declining trend.

In the next 2 to 3 years, 50% of the shipyards to go bankrupt

Influenced by the continuously strong risk of European economic depression, sluggish recovery in U.S. economy and development slowdown in emerging economies, the market demand shrinks. The shipping market also faces numerous release of shipping ability which is in severely oversupply, and the competition among cargo owners or shipping enterprises is fierce. In addition, due to the increase in oil prices and other production costs of shipping enterprises, the freight revenue of shipping enterprises sharply falls, generally facing losses.

Currently, there are severe loss and production halt phenomena in shipbuilding and transport industries. Due to the downturn in the ocean shipping market, some shipping enterprises conduct scrap processing on unprofitable ships in advance. Under the premise that shipping enterprises reduce the shipping ability, shipyards are also deeply influenced and fall into a slump. In the case of successive bankruptcy of shipyards in every major shipbuilding province in China, industry experts believe that 50% of the shipyards in mainland China will go bankrupt in the next 2 to 3 years.

Shipping market to be more difficult and adverse to the recovery in the shipbuilding industry

Presently, the supply and demand contradiction in global ship markets is hard to be eliminated. The ship market will be continuously in the doldrums and less likely to rebound in the short term. Meanwhile, the market demand for ship structures of newly-built ships again changes internationally over the previous year. Despite of the sluggish total trading volume, bulk-cargo ships still dominate the market. The trading volume of oil ships also begins to slightly rebound. The comprehensive market performance of large-sized equipment products (oil ships, liquefied gas ships, drilling rigs, production platforms and offshore supporting ships) related to exploration, development, production and transport of oil and gas is relatively active, while the market of container ships, large-sized container ships in particular, is very weak. In 2013, because of the successive delivery of super-large ships ordered in 2011, there will be severely excessive tonnage in the container shipping market which will face larger pressure. In 2013, the continuously stagnant ocean shipping market in China will be adverse to the recovery in the shipbuilding industry at the later stage.

Meanwhile, it possibly takes 2 or 3 years for the recovery in the shipping industry, and that in the shipbuilding industry will accordingly lag. However, with the accelerated pace of global economic recovery, the shipping industry will rebound at an accelerated speed. It is believed by experts that the shipbuilding industry may usher in the “spring” at the end of 2014.


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