50% of China's Shipyards Facing Bankruptcy Good For Recovery

As many as half of China's shipyards companies will file for bankruptcy in the next 2 to 3 years.

As many as half of China's approximately 1,600 shipbuilding companies will file for bankruptcy in the next 2 to 3 years.

Several recent reports credit Tan Zuojun, General Manager of the China State Shipbuilding Corporation (CSSC) as making the prediction, which echoed the same view as industry executives being reported last month by Reuters, who also said that only the biggest Chinese shipyards may survive.

According to comments by industry players quoted by India's Economic Times, the depressed industry conditions in China could have a positive effect on the global industry with one player saying "it is the only hope."

"Until some of the Chinese shipyards start going bankrupt, there would not be any improvement in the market conditions," commented a shipowner from Mumbai.

"If not, the Chinese government will continue to give subsidies and the yards will continue building ships which will keep flooding the market, depressing it further," he added.

"It is the right time for the government to come to the help of the industry to add national tonnage," said a member of the Indian National Shipowners' Association (Insa).

In 2011 China accounted for around 41% of global shipbuilding in dead weight tonnes (dwt) and the China Association of the National Shipbuilding Industry said that same year the volume of new orders fell 52%.

Citing Clarkson data, Beijing's Securities Daily newspaper said global new orders in the first 5 months of 2012 were down 50% year-on-year with total value also decreasing at an annual rate of 47% year-on-year.