Chinese shipyards in bid to boost orders

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Friday, 28 November 2008

Shipyards in China, seeking to overtake South Korea as the biggest shipbuilding nation, may stop asking customers for down payments as they vie for orders in a global recession. Yards including units of China Shipbuilding Industry Corp, the nation's largest, recently commanded advance payments of as much as 70 percent, Bao Zhangjing, assistant director of the China Shipbuilding Economy Research Center, said in Shanghai yesterday. The global financial crisis has reduced demand for goods from large exporters including China, reducing sales of ships to carry them, Bloomberg News said.
New orders in China are set to decrease 42 percent this year, the biggest drop among the three biggest shipbuilding nations, according to Clarkson, the world's largest shipbroker.
"Down payments of zero won't be the rule, but there will be occurrences," Bao said. "Generally, down payments at Chinese yards may be less than 20 percent while demand is low."
Last year, China surpassed Japan to become the second-largest shipbuilder by order backlog, according to Clarkson. The nation had 214 million deadweight tons of ships on order at the end of October, while South Korea had 217 million and Japan 112 million. Deadweight tonnage measures a ship's carrying capacity.
"Cancellations will occur globally," Bao said. "Because China has relatively more start-up yards, many of them focusing on dry-bulk carriers, cancellations may be more severe here."
The Baltic Dry Index, a benchmark of demand for shipping dry goods such as iron ore, posted a fifth straight decline on Tuesday on weakening steel demand. The index, down 93 percent from its May 20 record, fell 2.4 percent to 804 points.
New ship orders globally will fall 60 percent next year to 60 million deadweight tons and will reach 50 million in 2010, Bao said.
Slackened demand and canceled orders would leave shipyards with excess capacity from 2012, he said.
As Adapted from Shanghai Daily