Shipbuilder expands operations to weather industry downturn

BEIJING - China Shipbuilding Industry Corp (CSIC), one of the country's major shipbuilding conglomerates, plans to expand its business in the wind-power industry as it looks for ways of coping with a declining shipping market, said a senior company official.

"Given the (likely) difficult market conditions in the next few years, we will adjust our business structure by developing non-marine production," said CSIC's Senior Executive, Sun Bo.

"We will invest more in extending our production chain and increasing the manufacturing capacity of wind-power equipment," he added.

According to Sun, most of the company's wind-power products are currently sold in the domestic market, with only a small proportion exported to the United States.

"We intend to reach more overseas markets through the US in the next few years," he added.

Last year was a difficult one for the global shipping industry, mainly because of the fragile world economic recovery, according to analysts. In the meantime, the surging price of oil and an oversupply of vessels have compounded the industry's woes, they added.

The lackluster market has also hurt the shipbuilding industry. For the January-October period in 2011, Chinese shipbuilders reported total losses of 3.03 billion yuan ($475 million), up 40.6 percent from the same period a year earlier, according to the China Association of the National Shipbuilding Industry.

More than 15 percent of shipbuilding companies in China reported losses in 2011 - "a large increase from the previous year", according to the association.

CSIC's Sun admitted that he does not expect an immediate recovery this year. "The shipping market (in 2012) might be even worse than last year," he said.

According to Sun, the company will dedicate more resources to non-marine production, such as wind-power and equipment for offshore oil and gas exploration.

"We are a big company with a strong book balance and we have technological advantages in the manufacture of wind-power equipment," he added.

Currently, the company has four wind farms across China in the Inner Mongolia autonomous region, the Xinjiang Uygur autonomous region, Jiangsu province and Chongqing.

According to the company, sales revenue from wind-power components and whole-set equipment jumped to 7.8 billion yuan in 2011 from 6 billion yuan in the previous year. It accounted for "a small percentage" of the company's total 2011 revenue, the company said.

Yang Huanzhi, vice-director of the administration department, said the company's goal is to become one of China's top three manufacturers of wind-power equipment (by production capacity) during the next few years.

Analysts have praised the company for its technological advantages in core-component manufacturing. However, they said it still faces challenges as it seeks to expand further in the wind-power industry.

Wang Hexu, an analyst with Hwabao Securities Co Ltd, said CSIC might have to triple its production capacity to become one of the nation's top three manufacturers.

"China's wind-power industry has matured after nearly a decade of development. Leading companies in the industry are very competitive and industry consolidation, amid fierce competition, is expected to take place in the coming years," he said.

"These factors may pose some challenges for newcomers such as CSIC," Wang added.

Meanwhile, the wind-power sector still boasts a bright future, Wang said. According to a development blueprint by the State Grid Corp, China's biggest electric-power transmission company, the nation's wind-power capacity is expected to jump from 45 gigawatts (gW) in 2010 to 90 gW in 2015.