While China has spent more than a decade building the world's largest capacity, it is today faced with an economic downturn that proves to be the first true test of how it will navigate a serious downturn in new ship orders. Accroding to Reuters report, several smaller shipyards are on the brink of bankruptcy as orders dry up.
New orders toChina's more than 2,000 shipyards plunged 43 percent to 29 million deadweight tonnes (dwt) in the first nine months of this year, Reuters reported, citing the China Association of the National Shipbuilding Industry (CANSI) said. And worse still, approximately one-third of Chinese shipbuilders received no new orders in the period.
The global shipbuilding market is traditionally a hard cyclical market, as during good times shipowners often pack the world's shipbuilders with newbuild contracts, only to see markets evaporate when economies turn downward. The prolonged global economic crisis is making this downturn particularly pronounced.
Shipbuilding capacity in the world has tripled since 2002, right before a 5-year industry boom, and most of the new capacity was added in China -- which had aspirations to become the world's top shipbuilding by 2015.
As has been the case in other shipbuilding nations, the larger companies with deeper financial reserves are more apt to ride out the crisis, while small and medium-sized yards could be in peril.
(Source: Reuters & Staff Reports)