Shipbuilding industry passes through stormy period

Updated: 2011-03-16 11:08

By Han Tianyang (China Daily)

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Shipbuilding industry passes through stormy period

This deep-water semi-submersible drilling platform from the China Shipbuilding Industry Co is the sixth generation of its type in China, and a technological breakthrough. It was delivered to the Noble Corp in the US, an offshore drilling contractor, in 2009. [Photo / Provided to China Daily] 

China's largest shipbuilder has reported robust growth in major indices for last year, thanks to internal improvements as well as a recovering global economy.

The year 2010 proved to be better than 2009, when the financial crisis hit the shipping business hard, and Chinese shipyards experienced a drop in new orders and the cancellation of existing orders.

At the Beijing-headquartered China Shipbuilding Industry Corporation (CSIC), however, last year's revenues increased 17 percent, to 142.5 billion yuan ($21.19 billion), and profits rose 11 percent.

Sun Bo, CSIC's senior executive, said they had received orders for nearly 10 million deadweight tons of ships in 2010, almost triple the figure of 2009.

Sun cited China Association of National Shipbuilding Industry statistics to show that, last year, 20 percent of China's shipyards - the bigger, more robust ones - got roughly 80 percent of the order. The other 80 percent, the smaller shipyards, only got a 20-percent slice of the pie.

"Our shipyards are among the top ones and therefore we are able to seize the opportunity," he said.

That does not mean that they are without their challenges: ship prices are still much lower than for the pre-crisis period, because the rebound has had to start from rock bottom.

And, lower prices mean lower profits for shipyards, Sun pointed out, noting that his company has had to concentrate more on technological innovations and more efficient production to sharpen its competitive edge.

"It's not like the pre-crisis period when shipbuilding's profit margins were wide. Our company now needs precise management and cost cutting."

Competitive edge

Over the past few years, CSIC increased production capacity to 15 million deadweight tons and, Sun said, their main task over the next few years is to improve efficiency and make the best use of existing capacity.

"Some of our shipyards are brand new, some only did repair work before, and some just built smaller vessels. So, they need time to gain experience in building larger ships, and the Dalian Shipyard will give them strong support, " he said.

Last year, the company's output was about 9.3 million deadweight tons and, this year, it aims to utilize 13 million deadweight tons capacity.

In general, Sun said, 2011 should see a continued rebound in the industry, with an increase in new orders.

But, he added, the rising cost of raw materials like steel, and an appreciation in the yuan could put pressure on it.

Nonetheless, in spite of the narrower profit margins and other adverse factors, the company still plans to increase profits by 12 percent.

"It's going to mean stressing ourselves out, but in fact it's for the continued development of the company," Sun continued, noting that the goal is "challenging but feasible", based on a survey of the company's subsidiaries.

Related readings:
Shipbuilding industry passes through stormy period Full steam ahead for shipbuilders' plans for market position
Shipbuilding industry passes through stormy period Chinese shipyards weather hard times
Shipbuilding industry passes through stormy period Innovation urged in shipping industry
Shipbuilding industry passes through stormy period Mainland shipbuilder debuts on Taiwan bourse

To increase competitiveness, the shipbuilding giant has been delving on non- shipbuilding businesses and these now account for 40 percent of their total economic output.

Last year, they established a special branch at headquarters in charge of the non-shipbuilding businesses. It mainly deals with equipment manufacturing across a wide range, including wind power, nuclear power, petrochemicals and logistics.

CSIC is modeled on conglomerates and expects to develop a diverse group of businesses to offset market risks.

The company's vision is to have the non-marine division contributing at least half of the total output by 2015.

It also hopes to join the Fortune 500 sometime during the 12th Five-Year Plan (2011-2015).

In December 2009, the company had an initial public offering on the Shanghai Stock Exchange consisting solely of marine-related equipment subsidiaries - not the shipbuilding or non-shipping businesses.

Last year, the company took a new step by adding assets of its four major shipyards to the listed unit. More than half of its assets are now listed.


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