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China to have 20-30 active shipbuilding yards after consolidation

China to have 20-30 active shipbuilding yards after consolidation
China will be left with only 20 to 30 shipbuilding companies with active operations when the severe, ongoing consolidation period of the industry is complete over the next few years, according to Ren Yuanlin, executive chairman of Yangzijiang Shipbuilding.

There are now a little more than 100 shipyards with active day-to-day operations in China, a figure that has dwindled from about 300 during the second half of last year, and dramatically down from more than 3,000 big and small yards across China at the start of 2010.

“A lot more shipyards are expected to go out of business over the next two to three years as consolidation continues, leaving growth for only the stronger yards and the smaller, weaker yards will not have a chance to expand,” Ren said.

He pointed out that even state-owned yards will not be spared from the consolidation. Guangzhou Shipyard International, for example, has acquired 100% equity interest in its sister yards Longxue Shipbuilding and Huangpu Wenchong Shipbuilding Company as part of a restructuring process. The yards are subsidiaries of state-owned China State Shipbuilding Corporation (CSSC).

“By the time when the consolidation phase is complete, there will be only 20 to 30 yards left. This is in line with what the Chinese government would like to see, but market forces will eventually determine this outcome,” Ren said.

Privately-owned Yangzijiang is also looking at M&A opportunities amid the uncertain and challenging market conditions, as well undertaking prudent diversification and streamlining of its businesses.

Ren said that Yangzijiang’s acquisition target would have to be a company with considerable operations and with products that can complement Yangzijiang’s existing offerings.

While Yangzijiang has decided to stop expanding more into the rig building business after just inking one job, the yard has ventured into the construction of LNG carriers with firm orders for two 27,500 cu m ships.

The Chinese yard is also looking to confirm orders to build a pair of large-sized 80,000 cu m LNG carriers, in view of rising demand for LNG in China.

In its core dry bulk shipbuilding business, Yangzijiang’s strategy is to allow for buyers to delay taking delivery of the newbuildings, and minimise cancellations of the contracts.

The yard is also focusing on building larger containerships of over 10,000 teu, and is ready to construct oil tankers if the margins are higher than bulk carriers, according to Ren.