Economic storms hit China's shipbuilders

 

ONE OF the world’s leading shipbuilders may have added as few as two ships to its order books in the first six months of 2012, evidence of how the global economic slowdown is hitting the sector in China after a boom in recent years.

China’s Rongsheng Heavy Industries yesterday said in the first half of the year the company only received orders worth $58 million (€46.5 million), all for Panamaxes. Based on the average market price for these vessels, that equates to about two ships and compares with $725 million in the second half of last year when it received a big order for Suezmax ships.

The firm has embodied the spectacular rise of China’s shipbuilding capability, but its reliance on traditional vessels means it is coping with the global economic downturn less well than its more diversified rivals in South Korea, the world’s largest shipbuilding nation.

Rongsheng’s net profit for the first half of the year fell 82 per cent. It said it would have fallen into the red if not for a generous government subsidy, as the industry battles its worst plight since the global financial crisis. Revenue in the six months to June fell 37 per cent to Rmb5.5 billion ($865 million).

The worst shipping downturn in 25 years has seen an oversupply of vessels. Also, the euro zone crisis, the slow recovery in the US and a slowdown in Chinese growth have sent the Baltic Dry index – an industry benchmark of shipping costs – down 56 per cent this year.

Cosco International, the listed arm of China’s biggest shipping line, is set to announce heavier losses from a year ago when it reveals its interim results today.

“Rongsheng’s main customers are shipping lines carrying commodities, which are losing a lot of money because of a glut in supply. A Capesize dry bulk carrier travelling between Brazil and China can only charge around $3,000 a day, but it costs $9,000 a day to run, excluding fuel,” said Basil Karatzas, chief executive of New York-based Karatzas Marine Advisers. – (Copyright The Financial Times Limited 2012)