Clarksons Platou director and global head of dry bulk freight analysis Henriette Van Niekerk explained that economic logic dictates that the Chinese government will not support shipbuilding companies that cannot survive, otherwise known as "zombie" yards while business logic should see owners not ordering new ships and picking up bargains in the secondhand market.
Speaking at the dry bulk panel at the Asian Logistics and Maritime Conference in Hong Kong, Precious Shipping md Khalid Hashim however declared that "economic logic has been stood on its head". Explaining he said that with easy credit and big incentives from government finance agencies to keep the yards going, the situation with the yards now is "a gambler's dream".
While Hashim acknowledged the need for owners to be responsible, he expressed little hope that this would be the case. "Owners have no logic" when it comes to newbuilding orders, he declared. Combined with the likely incentives from the yards, the prospects for shipyard capacity reduction and better control of capacity supply seems bleak.
This sentiment was echoed and reinforced by Bimco Asia regional manager Zhuang Wei who believed the Chinese would not do so as the development of the yards has already been flagged in the 13th five-year plan and they employ many people and thus have a social imperative to be kept going. The long term trend is towards yard capacity reduction, he said, but noted that there is still a long way to go.
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