Chinese Shipyards Are Hard to Eliminate

Sea V, a self-propelled semi-submersible drilling platform built by Chengxi Shipyard (Guangzhou)

One should not expect that shipyards in China will disappear so quickly.

For the most part, shipyards in Jiangsu, China’s largest shipbuilding province, is pressured by limited newbuilding orders. Given the current production situation, new orders may only sustain the shipyards’ production for two years before some of the middle and small-sized shipyards will be closed (Source: Jiangsu Economic and Information Technology Commission (“JEITC”)).

The JEITC monitors 66 shipbuilding companies in Jiangsu; however, only 23 shipyards received new shipbuilding orders in the first half of 2013.  However, just because a number of shipyards have insufficient orders for the long-term, it doesn’t mean the yards will disappear. There are alternative uses for shipyards until shipowners, private equity investors and even governments to provide sufficient orders to insure ship slots are filled for years.

It was reported by SinoShip on July 15, 2013, that CNPC Offshore Engineering, the offshore oil exploration subsidiary of state-owned PetroChina, plans to build 57 offshore units, including offshore vessels by 2020. The company plans four deepwater semi-submersible drilling platforms, 11 jack-up drilling units, 36 offshore vessels and another six offshore engineering related units. In addition, PetroChina is also constructing an offshore engineering equipment manufacturing base and two production supporting bases by 2015. The company’s investment in the 57 offshore units, offshore engineering equipment base and two production supporting bases are expected to total RMB 50 billion to RMB 60 billion.

The shipyards will need slots/space to complete the necessary requirements of PetroChina and its subsidiary. If it is not ships, shipyards also construct other large scale projects and now they have time and availability to construct the units for PetroChina. The shipyards will not simply disappear if in the current period the orderbook for ships is insufficient to fill slots.

Between government subsidies and alternative uses, these dinosaurs will live for another day.

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