Yangzijiang Shipbuilding Set For Best Year Since 2007

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November 13, 2013

A ship is seen under construction at Yangzijiang Shipbuilding. File photo courtesy Yangzijiang Shipbuilding

reuters_logo1By Rujun Shen

SINGAPORE, Nov 13 (Reuters) – China’s third-largest listed shipbuilder Yangzijiang Shipbuilding Holdings Ltd is on track this year to win the most new orders since 2007, a feat unlikely to be repeated soon as it has now almost reached full capacity.

Yangzijiang, based in eastern China’s Jiangsu Province, took home new orders worth $2.1 billion in the first nine months of 2013 and is poised to end the year with $3 billion worth of new orders, Chairman Ren Yuanlin told reporters.

The strong performance helped build up an outstanding order book worth $3.9 billion at the end of September, the highest in nearly two years, but that also means the company will have limited capacity for new contracts from now until 2016, Ren said.

Profit margins are also likely to be squeezed as many of these outstanding orders were converted from options booked at prices that were below current market rates by as much as 10 percent, he added.

“We made a mistake by signing too many options with ship owners in March and April this year,” Ren said after the company reported a six percent decline in its third-quarter net profit.

“We are asking the ship owners that want early deliveries to pay more, and adjusting our capacity to squeeze in some slots for 2015 and 2016 deliveries, to mitigate the impact.”

Yangzijiang is one of the few big yards in China’s shipbuilding sector that have benefited from a revival in ship orders this year, even as the global shipping industry remains troubled for the sixth consecutive year.

Only 4 percent of China’s more than 1,600 yards have scored new contracts so far this year, pointing to possible consolidation in the bloated sector.

Ren said China’s shipbuilding sector could face lower margins next year due to low prices, and Yangzijiang plans to diversify into a number of businesses, including trading and shipping, to reduce its reliance on ship building segment.

The company aims to reduce ship building’s contribution to revenue to 60 percent within three years from above 80 percent now, Ren said.

Orders placed at Chinese yards in the first nine months of the year, in deadweight tonnage terms, jumped 80 percent from the whole of 2012, but the growth in dollar terms was a far moderate 10 percent, according to the World Shipyard Monitor published by Clarkson Research.

($1 = 6.0919 Chinese yuan) (Editing by Miral Fahmy)

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