Orders are difficult to renew, and the shipbuilding industry encounters "life and death" again

The shipbuilding industry, which survived the downturn in 2009 and tasted the joy of the market recovery in 2010, faced another downturn at the beginning of 2011. With the overcapacity and the sluggish performance of the global shipping market, will the once proud "gold industry" be in deep trouble?
For Xiao Jun, general manager of Wuhu Xinlian Shipbuilding Co., Ltd., putting all the funds into the shipbuilding industry has put him in a "dilemma". “Earlier, the company did receive a lot of orders for new ships, and the production has been arranged until 2013. But follow-up orders are weak. Since March of last year, we have not opened a new ship (received orders for new ships), and even not many customers have inquired about the price. ” Xiao Jun said helplessly, “Who can tell me where is the next bull market in the shipbuilding industry?”
According to Clarkson's research data, in the first month of this year, there were 64 new orders for ships of 1.55 million gross tons worldwide, down nearly 50% year-on-year. Among them, China, which has already taken the throne of the "big shipbuilding country", has set a new low in 16 months with 45 new ship orders of 1.07 million tons and a value of 1.7261 billion US dollars.
The weak trend continued into February. At the beginning of February, with the deterioration of the shipping market, bulk carriers and major shipowners delayed placing orders for container ships in the new stage, and the global hand-held orders decreased by 1.7% compared with a month ago.  
 
The situation of pinching Xiao Jun before and after is by no means an isolated case.
“Since the beginning of the year, we haven't opened a store. ” In an interview with this reporter, Shen Siwei, deputy general manager of Qingdao Beihai Shipbuilding Industry Co., Ltd., gave a surprisingly similar answer to Xiao Jun. Shen Siwei told reporters that similar situations are quite common in the industry.
"The phenomenon of decreasing new orders for ships did not start today," Liu Weihua, an associate professor at the School of Management of Tianjin University, told reporters that since August 2010, with the decline in the shipping index, the inquiries from shipowners decreased, and the new ships undertaken by shipbuilding enterprises Orders have gradually dwindled.
Shipping expert Chen Yi believes that the reason why shipbuilding companies are in a dilemma in taking orders for new ships is that when ship prices were low under the influence of the financial crisis, shipping companies adopted a low-cost expansion strategy. However, the current concentrated release of shipping capacity has resulted in the inversion of the increase in freight volume and the increase in capacity.
Taking iron ore as an example, my country imported 68.97 million tons of iron ore in January, an increase of 10.89 million tons over December last year, an increase of 18% month-on-month and a year-on-year increase of 47.9%, and the import volume hit a historical record. The increase in the capacity of "capesize" ships was much higher than the increase in iron ore imports. "Chen Yi said.
According to the calculation of Credit Bank of Germany, by the end of 2011, the market will only need 230 capesize ships. In the first month of this year, 20 capesize ships entered the market, and by the end of this year, deliveries of this type of ships are expected to increase to 420 ships. Even if the import volume of iron ore at that time can maintain the current high growth rate of 47%, it is difficult to digest the high growth rate of 80% of the capesize ship capacity. "It's hard to imagine not having excess capacity!" Chen Yi said.
The container shipping market is also facing the worry of too much new capacity. Alphaliner's latest statistics show that this year, 1.3 million TEUs of new container ship capacity will be put into the market, and the overall market capacity will increase by 8.8%. Next year, there will be 1.3 million TEUs of new container ship capacity, an increase of 8.6%.
It is not only the excess global shipping capacity that disappoints shipowners, but the slump in the shipping market has accelerated the dashing of their hopes. On January 21, the Baltic Dry Index (BDI) had fallen to 1370 points, a two-year low. In addition, since the Baltic Capes Index (BCI Index) rose to a high of 5402 on June 1 last year, it has fallen all the way, with occasional ups and downs during this period and it is difficult to reverse the decline. In January this year, the BCI index fell from 2285 points to 1368 points. On February 7, the index fell to a new low for the year (as of February 22) to 1281 points, which was close to the freezing point during the financial crisis.
The reporter noticed that the trend of weak dry bulk shipping market has spread to the container shipping market. Taking the European line as an example, although some shipping companies have taken measures such as withdrawing shipping capacity, temporarily suspending sailings and reducing ship speed to maintain a balance between supply and demand of shipping capacity, the average shipping space of shipping companies in the market is only maintained at about 80%. Under the influence of the continuous shrinking of cargo volume, the market freight rate continued to decline. On February 18, the freight rate (maritime and marine surcharge) for Shanghai's exports to the European base port market released by the Shanghai Shipping Exchange was US$1,246 per TEU, down 4.5% from the previous week. On the North American route and the Australia-New Zealand route, the volume of cargo continued the trend of shrinking in the previous period. The average space utilization rate of the shipping companies on the two routes dropped to about 70% and 50%, and the freight rate also dropped to varying degrees.
Under the circumstance of overcapacity and sluggish global shipping market, shipowners are obviously afraid to place new orders.
 
"Internal and external troubles"
External aggression has made Xiao Jun, Shen Siwei and other heads of domestic shipbuilding enterprises devastated, and internal worries are even more worrying. According to Liu Wei, an analyst at the China Shipbuilding Industry Research Institute of Comprehensive Technology and Economics, rising labor costs, rising raw material prices, and the appreciation of the renminbi are the new "three mountains" that weigh on companies.
“The cost of steel accounts for about 35% of the total cost of shipbuilding. Even if it increases by 1%, companies are under pressure. Now our company's cost of steel alone has risen by 20%. ” Shen Siwei said
Xu Xiangchun, the information director of "My Steel Network", calculated the account for the reporter: the price of 10mm ship plate in Shanghai was 5,050 yuan/ton in November last year, and it rose by 150 yuan/ton in January this year to 5,200 yuan/ton , and February 22, the price has climbed to 5550 yuan / ton. In less than 3 months, the price of 10mm ship plate has risen by nearly 10%.
The soaring copper price is also a major concern. On February 21, the Shanghai copper 1105 contract closed at 74,630 yuan, down 90 yuan or 0.12% from the 18th. However, the effect of such a weak decline on the large copper-using shipbuilding enterprises is simply a drop in the bucket. “The current copper price is still challenging the bottom line of profit for shipbuilding companies. ” said Shen Jingwei.
Coupled with the rising labor costs, shipbuilding enterprises are even more suffering. Wages for workers in the shipbuilding industry in coastal areas rose by an average of 15 percent last year, the China Shipbuilding Industry Association noted. Shen Siwei told reporters that in the post-holiday labor market in Qingdao, a monthly salary of 2,000 yuan can attract college students, but a monthly salary of 3,000 yuan cannot attract migrant workers.
After the financial crisis, ship prices have fallen to 2004 levels. In this context, the continuous appreciation of the RMB will undoubtedly make matters worse for my country's shipping industry. In the case that most of the orders held by Chinese shipyards are denominated in US dollars, the continued appreciation of the RMB means that the cost of foreign exchange settlement for shipyards in converting ships exported at the contract price (US dollars) back into RMB continues to rise. The central bank's move to raise the RMB deposit reserve ratio and RMB deposit and loan interest rates of financial institutions has also increased the loan financing cost of shipping companies.
 
How to redeem
Liu Wei's analysis pointed out that under the influence of factors such as the gradual release of production capacity and the maintenance of relatively low orders, the current ship price can only be consolidated at the bottom and cannot achieve a trend increase. According to the current ship price, the gross profit margin of the shipyard is still low.
In the era of global economic integration, the recovery process of the world economy will continue to affect China's shipbuilding industry. At present, there are still great uncertainties in the development of the world economy. The G20 finance ministers and central bank governors meeting concluded on the 19th believed that the global economic recovery momentum continued to consolidate, but the development was still uneven and downside risks still existed. Most advanced economies have seen slow economic recovery and high unemployment; rising energy and commodity prices and rising inflationary pressures. Liu Weihua predicts that "under this environment, the slump in the shipbuilding industry, which is an economic barometer, may intensify in the future. ”
Under the shadow of pessimism, many domestic banks have lowered the credit ratings of shipbuilding companies. The decline in new orders in the shipbuilding industry means that the industry is generally not optimistic about the trend of global economic recovery for a period of time in the future. “This shows that the world economy may face severe fluctuations in the post-financial crisis period, and if the situation cannot be effectively controlled, it will even worsen the results achieved in dealing with the financial crisis. ” Liu Weihua said.
From the perspective of news, Maersk Group announced on February 21 that it will order 10 18,000TEU container ships, which boosted the market to a certain extent. But in the eyes of industry insiders, "whether this is a harbinger of the recovery of ship orders or will exacerbate overcapacity remains to be tested." ”