Drop in commodity prices has slashed global demand for bulk carriers, pushing shipyards out of business, says Chinese news agency Caixin.
Huai Jinpeng, a vice minister from the Ministry of Industry and Information Technology, which oversees the sector said that the industry is plagued by excess capacity even after many large private ship makers have gone bankrupt or stopped production.
China alone will build ships with a total carrying capacity of 80 million tons next year, equal to the forecasted increase in global demand, estimates from the ministry showed.
In the first 10 months of 2015, Chinese ship builders have received orders for new vessels totaling 20.3 million tons, down 62 percent from the same period last year, data from the China Association of the National Shipbuilding Industry (CANS) show.
Orders for new ships have slumped amid weak commodity prices. The Baltic Dry Index, which tracks the shipping cost of bulk commodities, plunged to an all-time low since it was launched three decades ago. The index has sunk 95 percent since its peak in 2008.
The crisis has affected the Chinese shipping industry the worst because almost two-thirds of the country’s shipyards are geared to build bulk carriers.
“China lags behind countries like South Korea in terms of orders to make more sophisticated vessels, such as container ships and liquefied natural gas carriers,” Jin Peng, the secretary of CANS, told Caixin.