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The Chinese shipbuilding industry is experiencing

The Chinese shipbuilding industry is experiencing a significant expansion, driven by strong newbuilding demand and the need to meet growing global shipping needs. Several major shipyards are investing heavily in expanding their production capacity and capabilities, focusing on building a variety of vessel types including bulkers, tankers, containers, and gas carriers.

Nantong Xiangyu Shipbuilding & Offshore Engineering is one of the shipyards leading this expansion. They have recently acquired a bankrupt shipyard, Jiangsu Hongqiang Ship Heavy Industry, and plan to renovate and reopen it. This expansion will increase their production capacity by around 60%. New Times Shipbuilding is another major player in the Chinese shipbuilding industry. They are investing 5 billion yuan ($690 million) to expand their shipbuilding capacity and build a new energy ship smart project. This project includes plans to build a 700-meter-long mega drydock capable of building two very large crude carriers (VLCCs) side-by-side. Hengli Heavy is also expanding its production capacity and plans to list its shipbuilding company on the Hong Kong Stock Exchange. They are investing 11 billion yuan ($1.5 billion) in a new facility that will double their annual shipbuilding capacity. Hengli Heavy is also expanding its current dry dock and plans to construct high-value-added green ships and advanced offshore equipment. Yangzijiang Shipbuilding is another Chinese shipyard planning to expand its facilities. They plan to acquire land to set up a base for clean energy vessel manufacturing, including LNG. The company has a record orderbook value of $16.1 billion and is focusing on building green products such as methanol dual-fuel vessels, LPG carriers, and VLECs.

These are just a few examples of the many Chinese shipyards expanding their production capacity and capabilities. The expansion of the Chinese shipbuilding industry is a positive development for the global shipping market and will help to meet the growing demand for new vessels, but it also raises concerns about potential overcapacity in the shipbuilding market. Despite these concerns, several factors suggest that the current situation is manageable and far from creating overcapacity.

First of all, the current orderbook-to-fleet ratios (in terms of DWT, TEU, and CBM) for bulkers (9.8%), tankers (12.6%), containers (22.3%), and gas carriers (46.7%) are generally considered healthy based on the existing fleet and future trade demand. This indicates that the level of newbuilding orders is in line with fleet renewal and growth needs.

Second, there is a significant aging fleet. The substantial proportion of older vessels in all main vessel categories, over 20% for bulkers and 34% for tankers in terms of DWT, over 30% in terms of TEU for containers, and about 29% in terms of CBM for gas carriers are over 16 years old, suggests a strong need for fleet renewal. This will also drive demand for newbuildings in the coming years.

Third, stricter environmental regulations will likely accelerate the retirement of older vessels, further contributing to demand for newbuilds. This may also force many other vessels - already in their early or mid-life - to retrofit and apply new technologies, for which shipyard slots will also be needed.

Sale and Purchase

Dry:

As the summer came to an end, the bulker secondhand market has been busy. One newcastlemax and two capesizes changed hands this week. “Cape Azalea” - 208K/2012 Nacks was sold to Greeks for USD 38.25 mills and “Azure Ocean” – 180k/2007 Imabari and “Lila Lisbon” – 176K/2003 Universal were sold to Chinese buyers for USD 25 mills and USD 12.5 mills respectively. The Indian built panamax “Golden Ruby” - 74K/2014 Papavav was sold for USD 21 mills. The supramax “Jag Rani” - 57K/2011 Cosco Zhoushan changed hands for USD 14 mills, while the handy “African Egret” - 34K/2016 Namura was sold for USD 21.75 mills.

Wet:

Once again the tanker S&P activity was strong, with one transaction more than the bulker S&P market. The LR1 “Fair World” - 75K/2004 Hyundai Heavy was sold to Chinese for USD 20.5 mills while the ice classed 1A LR1 “Two Million Ways” - 74K/2008 Onomichi, changed hands for USD 30 mills. Chinese also bought the LR1 “HTM Conqueror” - 71K/2004 STX for USD 18.75 mills. The MR2s “STI Opera” - 50K/2014 Hyundai Mipo and “STI San Antonio” - 50K/2014 SPP were sold for USD 41 mills each to undisclosed buyers, while the deepwell and zinc coated MR2 “Kalamos” - 47K/2004 Iwagi changed hands for USD 17.8 mills. Finally, the stainless steel MR1 “Lyderhorn” - 34K/2006 Shin Kurushima changed hands for USD 26.6 mills.

Xclusiv Shipbrokers Inc.