Slimming Problem for Shipbuilding

Reporter Zhang Xianghui

Over the years, with China's shipbuilding industry becoming stronger and more powerful, the production capacity has grown rapidly. However,the “big body” does not have sufficient muscle to support it. The production capacity surplus has become the obstacle on the way to transformation and upgrading of shipbuilding industry. Thus, why the excessive capacity is so hard-rooted and difficult to contain?

One of the main reasons for the rapid expansion of China's shipbuilding capacity is great development of the world economy and the shipping industry. In particular, the rise of China in terms of size and speed has an important impact on the global economy, and the continuous development of China's economy promotes the rapid development of China's foreign trade, it also drives the development of Chinese shipping and shipbuilding industry. The frantic rise of the Baltic index that began in 2003 reached 11793 points in May,2008. Large number of private and foreign-funded enterprises came into being like bamboo shoots after rain due to the soaring shipping price, thus the “gold digging” time in Chinese shipbuilding industry started.

The overcapacity of China's shipbuilding industry is the result of many factors, but the major reason is the new capacity building in many places in China.

The shipping capacity was already excessive in 2009,and the import and export trade has slowed down, the revitalization plan which is originally to adjust structure has been serious distorted in the operation. Under the stimulus of “four trillion policy”, the shipbuilding enterprises rushed to increase scale, and local governments, including Shandong, Hubei and Liaoning,also made great efforts and took speedy actions to build large number of shipyards. Apart from this, when the Plan of Adjustment and Revitalization of Shipbuilding Industry was issued in 2009, some shipping companies also increased investment in shipbuilding.

According to incomplete statistics, by the end of 2011,the shipbuilding capacity in the world was over 200 million dwt, of which, China has over 80 million dwt,and most of these new capacity were built after 2005.These production capacity will not withdraw from the market in a short period of time. The surplus supply means that the ship price will remain in slump in a long term, and it will be hard for shipbuilding enterprise to restore its profit ability.

Financial institution is also a force to be reckoned with in boosting shipbuilding capacity. According to many shipyards, at that time when the market was good, banks begged shipyards to loan, and the procedure was simple.The approval of loan was basically a formality. All these caused hidden danger for bad loans in the future.

At present, with shipbuilding market and investment bubble having burst, not only the life of shipyards is hard, even some financial institutions are also tasting the bitter life caused by the craziness at that moment.STX Dalian, China Dong Fang Shipbuilding Co.,Ltd and other shipyards which are in difficulty also make many financial institutions suffer in great pain.

Today, although the publication of the list of first batch of enterprises of Regulation Conditions for Shipbuilding Industry will undoubtedly provide strong driving force for the structural adjustment, transformation and upgrading of Chinese shipbuilding industry, the problem of overcapacity can only be resolved through greater efforts by all parties.