Shipbuilding gets govt upgrade plan

The State Council has rolled out a plan to boost restructuring and technology upgrading in the shipbuilding industry, with new capacity to be controlled and outdated capacity to be weeded out, Xinhua reported Sunday.

The plan is part of a series of government instructions to curb capacity growth in industries that are suffering from a supply glut.

The National Development and Reform Commission said in a statement Friday that eliminating excess capacity in sectors like steel, cement and shipbuilding will be an important task for China's economic restructuring in the second half of this year.

The State Council's plan has laid out a road map for the industry's development over the next three years. Shipbuilders are encouraged to develop high value-added ships and retire old ships in advance of their expiration dates.

Exploration of more profitable sectors such as marine engineering is also encouraged in the plan, and financial aid will be offered to shipbuilders considering expansion in the overseas market.

Zhou Liwei, an expert at the China Classification Society, told the Global Times that detailed support measures such as subsidies and preferential tax policies are expected soon.

"Restructuring and technology upgrading will be the focus of the industry in the next few years, in a bid to ease the supply glut of low-end ships and boost technology competence in producing high-end ships," said Nie Lijuan, deputy secretary-general at the China Association of the National Shipbuilding Industry (CANSI).

In the first half of this year, Chinese shipbuilders received 22.9 million deadweight tons of new orders, up 113.2 percent year-on-year and accounting for as much as 44.2 percent of the world's market, data from CANSI showed.

However, Nie noted that the market share would be much smaller if calculated in terms of the financial value of the orders, as Chinese companies are still not very competitive in producing high-tech vessels such as LNG ships and large container ships.

Despite an increase in new orders in the first half, total supply in the sector still far exceeds the demand. Many shipbuilders have announced that they are gradually shifting to business with more added value, such as the marine engineering sector, but they are still struggling as ship prices have been nearly halved compared with the peak price back in 2007.

The 80 major shipbuilders reported net profits of 3.58 billion yuan ($584.26 million), down 53.6 percent year-on-year, according to CANSI.

Guangzhou Shipyard International Co, a major State-controlled shipbuilder, has reported a 32 percent profit decline in the first quarter. China Rongsheng Heavy Industries Group, the largest private shipbuilder in China, also warned that it will incur losses in the first half given the sluggish market.

Of the previously mentioned new orders Chinese shipbuilders received in the first half, 91.9 percent or 21.04 million deadweight tons came from overseas ship owners. "Thus recovery of the sector still relies very much on the global economy," Nie said.