Tuesday, March 24, 2009
Beijing plans KG style ship financing
Shanghai: Central government is looking seriously at Germany’s KG system of financing ships as a way to help its beleagured, bloated shipbuilding industry through the downturn. Sources in Shanghai say that Beijing acknowledges its initial shipbuilding stimulus plan will not go far enough to stave off numerous bankruptcies and is scouting around for solutions, with a Sino version of the KG scheme likely to be announced soon. “This will be a model of financing to expand shipbuilding demand,” a well placed source said. Getting private citizens to invest in ships has seen a dramatic expansion of the German merchant fleet this decade, something China would like to mirror.
China’s rapid expansion of yards has come too fast too soon. From just 60 ocean shipbuilding yards a decade ago there are now more than 240. With the credit crunch many are expected to go to the wall.
China has had dealings with the German KG system. Back in September 2006, for instance, the Export-Import Bank of China for the first time linked with the world's largest shipping bank HSH Nordbank to jointly provide long-term loan finance for three 73,400dwt product tankers building at New Century Shipyard in China for German KG funds.
In February China's State Council, the Cabinet, adopted a stimulus plan for the country's shipbuilding industry. The State Council agreed to increase credit support by an unspecified amount for ship buyers. It also decided to extend the existing financial support policies for oceangoing vessels until 2012. These policies include tax rebates on key imported components for domestically owned oceangoing ships. Importantly, it said construction of new docks and the expansion of slipways should be suspended for three years to facilitate industrial restructuring. This moratorium gives a clue as to how long the mandarins in Beijing believe shipping’s malaise will last. The State Council also recommended investment in research and development of facilities to build high-technology ships and maritime engineering equipment and promote technical innovation. It is understood that the meeting also urged greater consolidation in the sector and there is a chance further rulings will be promulgated if the industry continues to falter, including cutting the mandatory age for scrapping ships on the mainland, which is up to 10 years longer than the international norm. The China Association of the National Shipbuilding Industry estimates new orders this year will slide by 50% this year. [24/03/09]
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