Shipbuilding Industry Collapses, Hits China and South Korea
by Wolf Richter
WolfStreet.com
May 20, 2016
Global overcapacity, plunging demand, and a price war
In the first quarter, South Korean shipbuilders saw their orders collapse by 94.1% to 170,000 compensated gross tons (CGT), compared to the prior year. In terms of dollars, orders collapsed 94% from $6.5 billion in Q1 2015 in to just $390 million.
Global orders for new vessels in Q1 have collapsed too, but slightly less, according to the Export-Import Bank of Korea, cited by IHS Fairplay: down 71% year-over-year to 2.32 CGT.
“Their business slump may continue throughout this year, and demand for oil tankers may improve slightly during the second half of the year,” Korea Eximbank said in the report. Current order backlog will provide work for about two years. For all of 2016, orders are expected to plunge by 85%, from $23.7 billion in 2015 to just $3.5 billion.
Chinese shipyards are in even deeper trouble.
In May so far, three shipyards went bankrupt and began liquidation: Zhong Chuan Heavy Industry, Zhong Chuan Heavy Industry Equipment, and Zhoushan Xuhua Metal Material.
In April, Zhenjiang Shipbuilding, a subsidiary of Sinopacific Shipbuilding Group, commenced reorganization under bankruptcy proceedings. Another subsidiary of Sinopacific, Yangzhou Dayang Shipbuilding, is currently restructuring and plans to lay off 38% of its workforce.
Two days ago, Shanghai Clearing House announced that Sinopacific’s parent company, Evergreen Holding Group, has defaulted on 400 million yuan ($61 million) of one-year bonds it had issued just last year — part of the wave of corporate defaults building up in China.
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