High Shipping Costs Are Here to Stay, Says Bloomberg
By Henry Ren (Bloomberg) Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers....
SHANGHAI (Dow Jones)–China aims to increase annual sales by domestic shipbuilders to CNY1.2 trillion (US$189.7 billion) by 2015 as it works toward its goal of becoming the world’s leading shipbuilding country, the Ministry of Industry and Information Technology said Monday.
China also plans to raise the value of annual shipbuilding exports to more than US$80 billion by 2015, the ministry said in a five-year plan for the shipbuilding industry.
The plan provides new details regarding China’s push for significant growth in domestic shipbuilding at a time when the industry already faces overcapacity. A recent report by the China Association of the National Shipbuilding Industry showed that total new orders from more than 1,500 shipbuilders in China fell more than 50% last year. Shipbuilders have said demand for commercial ships will remain poor this year amid continued global economic weakness.
A central part of the ministry’s plan for developing the sector is concentration of capacity. The plan calls for China to push forward with “structural improvements” to the industry, with the goal of 70% of the country’s shipbuilding capacity concentrated among its 10 largest shipbuilders by 2015. The plan also says China should aim to claim at least five of the world’s 10 largest shipbuilding companies by 2015.
“That’s going to take some consolidation,” said Matthew Flynn, managing director of Worldyards, a research firm. “At the moment, the top 20% of shipbuilders (in China) account for 63% of national capacity.”
But Flynn said the sales targets, while aggressive, appeared achievable.
“They’ll have to work hard to take orders in, considering the state of the shipping market. (But) this is doable assuming that the high yen keeps the Japanese somehow out of the market,” Flynn said. Worldyards estimates China’s existing order book for offshore and commercial merchant shipbuilding at US$109 billion, compared with US$140 billion for South Korea and US$41 billion for Japan.
The growth target would also require Chinese shipyards to continuously work to take market share from international shipyards, particularly in Korea, Flynn said. While Chinese yards will need to improve the quality and efficiency of new ships to appeal to a “buyer’s market,” they also stand to benefit from any appreciation of the Korean won, he said.
-By Andrew Galbraith, Dow Jones Newswires
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