Shipbuilding orders are hungry and financing is more hunger

On August 7, the weather in Nanjing was so hot that it was under fire. In the eight or nine shipyards on Jiangxin Island in Baguazhou, the empty space on the slipway is no longer the scene of the past.

According to the "National Economic Operation of Shipbuilding Industry in the First Half of 2013" issued by China Shipbuilding Industry Association, from January to June, the national shipbuilding completion was 20.6 million DWT, a year-on-year decrease of 36%.

Wang Dong (Weibo), director of the Ship Industry Management Office of the Nanjing Economic and Information Technology Commission, said in an interview with the reporter of China Times: "At present, shipbuilding enterprises face three difficulties: difficulty in receiving orders, difficulty in delivery, and difficulty in financing." Therefore, on August 4, the State Council issued the “Implementation Plan for Accelerating Structural Adjustment and Promoting Transformation and Upgrading of the Shipbuilding Industry (2013-2015)” (hereinafter referred to as the “Implementation Plan”) to urgently rescue the shipbuilding industry.

Shipyard without shipbuilding

On August 7, our reporter came to the Sinotrans Changhang Heavy Industry Jinling Shipyard (hereinafter referred to as “Jinling Shipyard”) on the bank of the Yangtze River in Qixia District, Nanjing. Looking out from the wall, I could see several unfinished ships. Scaffolding around the body and the workers wearing gray overalls walked by reporters in twos and threes.

At 10 o'clock in the morning, the machine electrician Xiao Yang got off work. On the one hand, because the weather is too hot, but the main reason is that there is no work to do. Xiao Yang said that what he is doing now is mainly the orders that have been left in the past. Last year, the workers had been resting for a long time, and many people switched.

Founded in 1952, Jinling Shipyard is the largest shipbuilding backbone of China Yangtze River Shipping (Group) Corporation and the largest shipyard in Nanjing. A workshop manager told reporters that in the good old years, the factory had more than 10,000 employees, but now it is only half left. Take their workshop as an example. At most, there are more than 1,000 people. Now there are only 400 people left. "The main reason is that there are fewer orders, and there are not so many people."

The shipyard depression affected the nearby "pool fish". Master Liu took over the restaurant next to the shipyard store two months ago. The former boss told him that the business here is very good. One day light noodles can sell more than 70 kilograms. After Master Liu took over, he discovered that the workers had become less and less, and the current business can barely be maintained.

Wang Dong told reporters that the situation at Jinling Shipyard was not bad. In the first half of this year, more than a dozen orders were received; in contrast, the days of private shipyards were even more difficult.

There are eight or nine private shipyards on the Jiangxin Island of Nanjing Baguazhou, which is separated from the Jinling Shipyard by half. Once upon a time, this is also a scene of a roaring and raging machine. Nowadays, the reporters are blind, most of them are empty, and a few ships are not new ships being built, but old ships that are repaired back to shore.

Nanjing Wujiazui Shipbuilding Co., Ltd. (hereinafter referred to as “Wujiazui Shipyard”) located in Dongjiang Village of Baguazhou has 3 10,000-ton shipyards and is claimed to be the largest private shipyard in Nanjing. A manager of the plant told reporters that only two of the shipyards in the nearby shipyards were still alive, while others basically stopped.

Investigation into the reporter and China Shipbuilding Industry Association released data highly consistent: the first half of this year, the national shipbuilding 20.6 million dwt, down 36% year on year; realized main business income of 120.3 billion yuan, down 18.5 percent year on year; total profit 3.58 billion yuan, down 53.6% year-on-year.

Orders of difficulty

The global shipping and shipbuilding market downturn in recent years, a great impact on China's shipbuilding market, significantly reduced orders for new ships, shipbuilding industry is facing the grim situation.

“When we researched a few years ago, many private shipyards said that orders were scheduled for 2013. Now we are going to investigate, and their orders are still only in 2013.” Wang Dong said.

According to data released by the Civil Explosive Shipping Department of the Jiangsu Provincial Economic and Information Technology Commission, in the first half of this year, the shipbuilding completion volume and hand-held orders of the province's shipbuilding industry decreased by 32.9% and 17.5% respectively. At present, the total number of hand-held orders in the province is 842 ships of 40.106 million DWT. According to the existing production capacity, if the new ship orders are not replenished in time, there are only about two years of production tasks; therefore, enterprises generally slow down the speed of shipbuilding, some small and medium-sized Shipbuilding companies are in danger of a complete shutdown.

The above data shows that during the same period, the volume of new orders received increased by 189.7%. Although there has been an increase, from the perspective of the 66 shipping companies included in the statistics, only 23 companies have new ship orders.

According to the analysis of China Shipbuilding Industry Association, in the first half of the year, the order volume of new ships has recovered, mainly due to the extreme downturn in the world shipbuilding market in 2012. The rebound in volume in 2013 is a return from the bottom to the normal state.

However, overall, the current world economic recovery is weak, the supply and demand relationship in the shipping market has not improved, and the new ship price and volume do not support the judgment of the ship market recovery.

Funding "tightening"

In Wang Dong’s view, shipbuilding companies are currently facing three difficulties: difficulty in receiving orders, difficulty in delivery, and difficulty in financing. The problem of financing difficulties is more prominent than the hungry of orders.

“The large-scale brand shipyard has a strong ability to take orders, but the price of the ship has fallen sharply. In the past, the shipowner asked for a shipyard, preferring to book the ship in advance. Now it is reversed, and the shipyard must pay the money to get the order.” Wang Dong told reporter.

It is understood that a shipbuilding order is divided into five parts: signing a contract, starting a project, boarding a ship, launching a ship, and delivering a ship. By convention, the shipowner must pay the shipyard 20% of the total price after each link is completed. When the market is good, the shipowner will pay 70% or 80% of the money in advance in order to get the shipyard to finish quickly. Now that the business is not good, the shipyard will have to get the money when it is delivered to the ship. The previous steps must be funded by the shipyard.

A large amount of investment has become a great burden for the shipyard, and the risk of delivery has also increased. Last year, many shipowners abandoned the ship and would rather not make advance payments or pick up the ship. The shipyard lost a lot. This has made many shipyards afraid to pick up.

In order to maintain operations, most shipyards can only transfer to banks, but the banks are not "powerful." The above-mentioned managers of the Wujiazui Shipyard said that banks now almost never give credit loans, all of which require mortgages, especially for private enterprises. The loan threshold is much higher than that of state-owned enterprises. The Jiangsu Provincial Economic and Information Commission also stated that the banking industry has regarded the shipbuilding industry as a key industry for credit regulation, and even for key enterprises, it only accepts loans.

In addition to financing difficulties, the cost of the shipyard is also high. Wang Dong said that labor costs are rising every year, raw material prices remain high, and the renminbi has continued to appreciate in recent years, which is eroding the profits of the shipbuilding industry.

Affected by the tightness of funds, the phenomenon of shipbuilding enterprises arrears with supporting factories, suppliers' funds, and wages of employees began to increase. The time when migrant workers blocked their salaries and other times occurred, which also seriously affected the normal production and operation of enterprises.

Self-help or rescue?

The economic downturn at home and abroad, the shipbuilding industry was forced to struggle in the "shoal", the "Implementation Plan" just issued by the State Council can save the shipbuilding industry from fire and water?

The "Implementation Plan" proposed seven major tasks, including the "adjustment and optimization of the shipbuilding industry productivity layout, strict control of new production capacity, integration of superior production capacity, elimination of backward production capacity, and promotion of industrial layout adjustment" proposed by Article 3. Many companies don't seem to be enthusiastic.

A person in charge of a shipyard in Gaochun District of Nanjing told reporters that the production capacity is now oversupplied. It is estimated that the next 5-10 years will be the phase-out period. Even if the government does not control, enterprises are unlikely to increase production capacity.

“The state encourages mergers and acquisitions, but this is determined by the market. The government can only guide and cannot lead.” Wang Dong said that large shipyards must also take into account the benefits of the boat factory, and the other party must have resources to be attractive. It will take a few years to recover the cost, and they are not willing.

“Many small factories are estimated to be self-defeating.” The person in charge of a shipyard in Gaochun said frankly.

However, more of the "implementation plan" is still attractive to shipbuilding companies. The above-mentioned Wujiazui shipyard management personnel believe that speeding up the retirement of old ships and strengthening the official ships and offshore equipment will benefit them. At the same time, these plans must be specifically refined, and financial subsidies are required to encourage early retirement. Official ship orders are currently in place. In the hands of state-owned enterprises, it is also necessary to do some tilting towards private enterprises.

In fact, the "implementation plan" more conveys the goals and methods of the new government's adjustment of industrial structure. Zhang Jiande, deputy director of China Shipbuilding Heavy Industry Planning and Development Department, said in an interview with the media that the technological innovation and improvement of key supporting equipment and materials manufacturing level are placed in the first two of the "implementation plan", which fully demonstrates the transformation and upgrading of the industry in the current industrial economy. It is in the first place, mainly through restructuring and promoting reforms to promote steady growth.

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