China urges shipbuilders to venture abroad

SINGAPORE: China wants its shipyards to look actively for acquisitions overseas amid weak oil prices and freight rates that have led to declining orders for offshore rigs and vessels worldwide.

The government is encouraging shipyards to develop and build more offshore equipment, according to a plan for the five years through 2020 posted on the website of China’s Ministry of Industry and Information Technology.

It also supports strategic cooperation among companies in oil and gas, shipping, offshore equipment and financial institutions, the plan showed.

The maritime proposals under the plan add to previously announced measures for the industry that have included selecting 51 yards deemed worthy of policy aid and promoting a move into building offshore rigs.

The steps are part of a broader cross-industry drive by the Chinese government to combine some companies in sectors including shipping and aviation and adopt other measures to bolster their competitiveness especially among overseas rivals.

“China’s shipbuilding industry is facing unprecedented challenges since the global financial crises,” the ministry said in the plan.

“But it’s been also presented with historic opportunities to overtake others amid pressing and challenging needs to adjust and upgrade industry structure.”

Under China’s latest plan, the government aims to maintain a “white list” of shipyards to whom it will direct more resources, while pushing smaller and weaker ones into restructuring and bankruptcy to slash shipbuilding overcapacity.

The industry should “accelerate the pace of venturing abroad,” the government said in the plan.

That includes encouraging qualified shipping companies to list in domestic and overseas markets and getting financial institutions to offer support for mergers and acquisitions.

It also urged shipbuilders to use the yuan in financing and trade to avoid exchange risks.

China aims to account for about 35% of the global offshore market and around 40% of the high-end vessel market by 2020, according to the plan, which didn’t provide comparative figures.

The government targets having its top 10 shipyards build more than 70% of the nation’s vessels by 2020 under the proposal.

The 10 leading shipbuilders on the mainland accounted for 53% of total orders completed and 71% of new orders received in 2015, according to previously announced figures.

Shipyards in China won 15.8 million dead-weight tons of orders in the first 11 months of last year and had 99.7 million tons on backlog, according to the Beijing-based China Association of the National Shipbuilding Industry.

Asian shipyards have cut jobs and production and some have exited the market in the past few years as vessel overcapacity and lower oil prices discourage companies from investing in new equipment and ships. – Bloomberg

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