2015 China ship market is still in the doldrums

In 2014, the ship market had a “small spring” type of recovery, but it failed to last long.

Experts said that the main problems facing the current shipbuilding industry are overcapacity in the shipping market, the decrease in the volume of new ships, the low price of new ships, the difficulty of corporate profits, and overcapacity. Accelerating scientific and technological innovation, promoting product structure adjustment and enterprise transformation and upgrading are still the main theme of this year's shipbuilding industry.

Capacity-reducing structure

According to the industry analysis report of China Shipbuilding Industry Association in 2014, in 2014, China's key shipbuilding enterprises faced an unfavorable market environment, actively adapted to the new trend of international ship technology and product development, and vigorously developed green environmental protection ships with high technology content and large market potential. Special-purpose special ships, high-tech ships, and ship products have achieved remarkable results. The deepwater drilling ship, the liquefied natural gas floating production storage and discharge device, the liquefied natural gas floating storage regasification device and the multi-type offshore auxiliary ship are all independently developed.

Statistics show that in 2014, China's shipbuilding enterprises and offshore engineering enterprises took orders of 59.95 million DWT, and the world market share increased from 47.9% in the previous year to 50.5%, maintaining the number one in the world. It has undertaken 31 types of marine engineering equipment and 149 marine engineering vessels. The amount of orders received was 14.76 billion yuan, accounting for 35.2% of the global market share, which was 5.7 percentage points higher than that of 2013, ranking first in the world.

Although the market position has not changed, the national shipbuilding completion volume decreased by 13.9% year-on-year, while some enterprises' profits have double-digit growth. This indicates that the overcapacity of the industry has been contained and the industrial structure has been further optimized. It is reported that through the clean-up, the annual production capacity has been nearly 10 million tons; the transfer shipbuilding capacity is about 5 million tons; and a number of planned large-scale shipbuilding projects have been suspended. Through the evaluation of the "Standard Conditions for the Shipbuilding Industry", there are two batches of 60 enterprises that have been announced through review, which will guide the concentration of social resources to eligible shipbuilding enterprises.

According to the statistics of the National Bureau of Statistics, from January to January 2014, the total profit of shipbuilding enterprises above designated size reached 24.4 billion yuan, a year-on-year increase of 21.3%. In terms of industries, shipbuilding enterprises reached 14.68 billion yuan, up 20.3% year-on-year; ship supporting enterprises 4.69 billion yuan, up 15.5% year-on-year; ship repair enterprises 510 million yuan, up 8% year-on-year. In terms of scale, large enterprises were 12.45 billion yuan, up 11.8% year-on-year; medium-sized enterprises were 5.28 billion yuan, up 25.9% year-on-year; small enterprises were 6.68 billion yuan, up 39.2% year-on-year, indicating that small and medium-sized enterprises have certain anti-risk capabilities.

As one of the leading enterprises in China's shipbuilding industry, the proportion of non-ship equipment of China Shipbuilding Industry Corporation in the total economic volume of the Group has gradually increased in recent years. In 2014, this proportion has reached 55.9%, an increase of 2.3 percentage points over the previous year. This shows that the restructuring of China Shipbuilding Heavy Industry has made new breakthroughs.

In fact, in 2014, the total number of shipbuilding completions in the three major shipbuilding bases around the Bohai Bay, the Yangtze River Delta and the Pearl River Delta accounted for more than 90%. The top 10 enterprises in the national shipbuilding industry accounted for 50.6% of the total completed work, and the top 20 enterprises accounted for 71.6. %, the top 30 companies accounted for 83.8%, which increased by 3.2, 5.9 and 7.4 percentage points respectively over the previous year, and the industrial concentration was further improved.

Among them, 4 companies ranked the top ten in the world in terms of new orders. Among them, China Shipbuilding Industry Corporation and China Shipbuilding Industry Corporation ranked the first and third place in the world shipbuilding group with new orders and hand-held orders. It can be seen that a number of key enterprises of marine engineering equipment in China have gradually formed, market competitiveness has been improved, and international status has been improved.

Accelerating scientific and technological innovation, promoting product structure adjustment and enterprise transformation and upgrading should be the main theme of this year's shipbuilding industry. CSIC currently has five major sectors in the non-ship sector, including energy equipment, transportation equipment, special equipment, electronics and logistics. In 2014, the non-shipbuilding industry achieved a total economic growth of 13.2% year-on-year, and the contracted value increased by 14.5%. In the interview with the media, the person in charge of CSIC also said that if the recovery prospects of the ship market are still not optimistic, our efforts to develop the non-ship industry will increase, and the proportion of the non-ship industry to the total economic volume of the group will continue to increase.

Offshore market risk highlights

In the past few years, many shipping companies in China have vigorously developed the offshore equipment industry in order to get rid of the impact of the international financial crisis and its lagging effects.
However, compared with the active entry, most domestic shipping companies are actually “haulized” in the transformation and upgrading. At the same time, with the advent of many speculative shipowners, the risk of offshore construction companies has been further exacerbated.

The offshore equipment manufacturing industry is characterized by high technology and high risks. In addition to some large-scale central enterprises (groups), some of the blindly “entered” shipbuilding companies have not built the hardware and software strength of the offshore platform. Most companies build offshore platforms in accordance with off-the-shelf shipbuilding models, while offshore platforms require higher welding processes and strengths.

However, since many of the companies currently engaged in the construction of offshore equipment are also engaged in shipbuilding, it is easy to apply the strategy of participating in the competition in the ship market directly to the offshore market. For example, most of China's offshore platform construction follows the characteristics of large-scale “human-sea tactics” of shipbuilding enterprises. This has led to the construction cycle of China's offshore platforms to a certain extent. Once the nodes are not completed, the shipowners may use this at any time. Discard the order for an excuse. Zhang Minghua, vice president of Pacific Shipbuilding Group, said in an interview that offshore equipment construction is different from shipbuilding. The business management, document management and system management of offshore enterprises are very different from shipbuilding. Shipbuilding ideas and construction contracts are used to implement the sea. Work projects, companies will suffer losses sooner or later.

The person in charge of a offshore construction company in Jiangsu expressed concern about the current status of China's offshore market. According to him, many of the existing offshore construction companies in China have chosen the “first build and then sell” model, in order to sell products by first grabbing the offshore market and then looking for buyers or renters. Therefore, many offshore platform orders have no “owner” at the time of signing, and the proportion of orders that really have demand is not large.

In this regard, relevant people in the industry said that speculative orders will bring greater risks to product construction companies and should cause the industry to be alert. In particular, influenced by various factors such as supply and demand, geopolitics, and crude oil prices, the “bear market” characteristics of the global offshore market have become increasingly apparent. However, in the current offshore construction market, the traditional project-based node payment model has been replaced by the large-end payment model, the offshore construction enterprises have to find new ways to explore the business model suitable for their own business development.

The model of “first build and then sell” has certain reference significance for enterprise groups with certain financial strength, but the “high risk” of its existence may be further amplified under the changes of market environment.

It is understood that the current offshore market generally has a business model of order-based production, a business model of pre-production and post-sales, a business model combining banks and enterprises, and a business model that uses financial leasing companies to place orders on their own.

But overall, regardless of the model, the down payment for offshore orders is only 10% to 20%, and the down payment ratio for some domestic enterprises is even as low as 5%. As a result, offshore construction companies will bear enormous financing pressure alone.

In addition, due to the long construction period and large investment of offshore products, offshore construction enterprises will undoubtedly face huge financing costs and multiple risks due to exchange rate changes and rising labor costs. Coupled with the fact that the downward trend of the global offshore market has become more and more obvious since last year, these risks faced by offshore construction companies have intensified.

Of course, there are also many companies in the domestic market that have successfully transformed offshore and successfully delivered products. Shanghai Zhenhua Heavy Industry (Group) Co., Ltd. independently developed and built the first offshore drilling platform “Zhenhai 1” to adopt the “first build and then sell” business model. After the platform was built, it was successfully sold to a Singapore company. As Zhenhua Heavy Industry itself has strong strength in the field of heavy equipment manufacturing, its parent company China Communications Construction Co., Ltd. has acquired the internationally renowned offshore design company F&G, which successfully implemented “first build and then sell” for Zhenhua Heavy Industry. The business model has laid a good foundation.

Ni Tao, deputy general manager of Jiangsu COSCO Shipyard Engineering Group Co., Ltd., said that although China's offshore equipment manufacturing enterprises are developing rapidly, the core technology of offshore equipment is not subject to people's situation, but key supporting equipment is basically monopolized by foreign suppliers. The offshore equipment enterprises still need to focus on improving the localization level of core equipment.

He said that in recent years, China's offshore equipment manufacturing industry has developed rapidly, but this industry has high risks. The state should strengthen guidance from the policy and foster several key enterprises with strength and R&D capabilities. Don't let many companies look at it. And on.

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