Chinese Shipyards Seen Closing as Orders and Vessel Prices Slump

Shipyards in China that built vessels worth as much as $40 billion last year face closing or bankruptcy amid 50 percent overcapacity, unprofitable margins and a shortfall of orders, Braemar Seascope Ltd. (BMS) said.

Survival of yards that are “slashing prices to the bone” to attract orders and secure deposits will depend on government support, Mark Williams, research director at the London-based shipbroker, said at a Marine Money conference in the city today.

“It really depends on central and local government assistance which is not guaranteed,” he said, adding 50 percent of Chinese shipbuilders that built vessels worth $30 billion to $40 billion in 2012, haven’t taken an order for two to three years. “Whether they’re supported or not depends on local development plans, it depends on employment prospects, or on real estate prices and whatever else the local and national governments feel they can be putting the resources to.”

China delivered 42 percent of the 2,428 vessels built globally at 483 shipyards in 2012, as measured by deadweight ton capacity, according to data from Clarkson Plc (CKN), the world’s biggest shipbroker.

Chinese shipyards are unlikely to take orders at current prices “unless they’re desperate or subsidized as the state yards are,” James Leake, managing director of research of ICAP Shipping International Ltd., a London-based shipbroker, said at the same event.

“You are going to see bankruptcies, particularly at Chinese yards,” he said.

To contact the reporter on this story: Michelle Wiese Bockmann in London at mwiesebockma@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net

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