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Shipbuilding sector at rock-bottom but rebound is not in sight: Yangzijiang

Shipbuilding sector at rock-bottom but rebound is not in sight: Yangzijiang
The state of the global shipbuilding industry has dived to rock-bottom since the sector’s recession started in 2010, but a rebound from this lowest point is not in sight and will not be easy, according to Ren Yuanlin, executive chairman of Yangzijiang Shipbuilding.

The outspoken Chinese boss mentioned at the company’s results briefing in Singapore on Wednesday that many shipbuilders continue to face heavy financial burdens, and the sorry state of the industry is attested by the failure of several Chinese shipyards over the course of this year.

“The Chinese government has been encouraging financial institutions to provide financing and guarantees for the more stable and stronger yards, but even then the banks may not be willing to do it as they need to do their own risk assessments,” Ren told Seatrade Maritime.

“On the surface, it may seem that the lack of support from the banks has led to the downfall of many yards, but the truth is the yards themselves are unable to generate any businesses due to the poor market,” he explained.

Yangzijiang, builder of mainly dry bulk carriers and containerships, has stayed profitable amid the adverse market conditions, as the shrewd businessman Ren has managed to steer the company in the right direction so far.

Ren has led Yangzijiang on a number of turns in the past years, as seen from the company’s shying away from its core shipbuilding business at the onset of the 2008 global financial crisis by sizing up its held-to-maturity and micro-financing businesses, before refocusing on shipbuilding in mid-2014.

In late 2012, Yangzijiang announced its venture into the offshore market, which was booming, by securing an order to build a jack-up rig. But Ren did not entered into the rig building business aggressively or speculatively, and he was proven right when the offshore market reversed to a downcycle late last year, leaving Yangzijiang with minimal exposure to the negative impact.

Yangzijiang has also declined to commit to any investments into compatriot Rongsheng Heavy Industries due to Rongsheng’s uncertain future as it continues to struggle with debts and ongoing talks with its creditors and banks.

“It is a complicated situation for Rongsheng as the scale of the company is too big,” Ren said. He had earlier confirmed his company’s interest in taking a stake in troubled Rongsheng, but would only commit if the acquisition terms are favourable.

Singapore-listed Yangzijiang has stayed profitable as it posted a profit of RMB1.74bn ($280.19m) in the first half ended 30 June 2015, down 15% compared to RMB2.04bn in the previous corresponding period.

Revenue, however, rose 12% year-on-year to RMB8.75bn, boosted by contributions from the shipbuilding segment.

As at the end of June 2015, Yangzijiang sat on an outstanding orderbook of $4.14bn, comprising 102 vessels, keeping the yard utilised until mid-2017. Nine existing orders for bulk carriers were changed to containerships, with most of the order conversions accompanied by increases in contract value. The total increment in outstanding orderbook for the second quarter was $25.4m.

In July to August, Yangzijiang secured new orders for four 9,700 teu and four 3,800 teu containerships with a total contract value of $510m, with four options attached to each type of the containerships worth another $510m.