(Bloomberg) — China Rongsheng Heavy Industries Group Holdings Ltd. said a new offshore-energy equipment unit may generate 50 percent of its orders over the next five years amid slumping demand for ships.
“There is a need to shift our focus to the offshore and marine business,” Chief Financial Officer Sean Wang told reporters in Hong Kong yesterday. “The shipping industry is undergoing a tough time.”
The shipbuilder, China’s largest outside state control, announced the formation of new offshore unit last month as it seeks contracts for oil rigs and tender barges to offset slowing ships orders. Guangzhou Shipyard International Co. also last month set up a unit to target the offshore sector, while Yangzijiang Shipbuilding Holdings Ltd. has formed an oil-rig venture with Qatar Investment Corp.
“This is going to be difficult as everybody wants to jump on the bandwagon,” Wang said. Making offshore products also requires higher capital investment and the use of more advanced technology than dry-bulk ships, he said.
Rongsheng is also working through a total of 16 orders for Valemax vessels from Brazilian miner Vale SA and Oman Shipping Co. The commodity ships, among the biggest afloat, are about twice the size of the capesize vessels that have traditionally hauled iron ore from Brazil to China.
The company has delivered five Valemax ships this year, in addition to one handed over in 2011, said spokesman William Li by phone. The remainder will be completed by the end of next year, Wang said. Vale is yet to secure permission to regularly use the ships at Chinese ports.
Rongsheng rose 2.1 percent to HK$1.46 at close in Hong Kong trading yesterday. It’s dropped 32 percent this year, compared with a 15 percent gain for the benchmark Hang Seng Index.
The shipbuilder has hired Don Lee, a former executive at rig-maker Sembcorp Marine Ltd. to run the Singapore-based offshore equipment unit, it said last month. The company also announced a contract to build a tender barge, which is used to drill wells. The order was the company’s first in the offshore- engineering sector, according to Barclays Plc.
The company’s first-half net income fell 82 percent to 215.8 million yuan ($35 million). It won orders for two ships in the period, compared with 24 a year earlier. The shipbuilder has also this year delivered a pipe-laying vessel to China National Offshore Oil Corp.
Shipyards in China won 12.6 million deadweight tons of orders in the first nine months of the year, compared with 23.9 million a year earlier, according to Clarkson Plc, the world’s biggest shipbroker. Their backlogs have fallen to 116.4 million tons at the end of September from 169.3 million tons at the end of 2011.
-By Vinicy Chan. Copyright 2012 Bloomberg.