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RUGAO, China/SINGAPORE (Reuters) - Deserted flats and boarded-up shops in the Yangtze river town of Changqingcun serve as a blunt reminder of the area"s reliance on China Rongsheng Heavy Industries Group, the country"s biggest private shipbuilder.A view of the Rongsheng Heavy Industries shipyard is seen in Nantong, Jiangsu province December 4, 2013. REUTERS/Aly Song
The shipbuilder this week predicted a substantial annual loss, just months after appealing to the government for financial help as it reeled from industry overcapacity and shrinking orders. Rongsheng lost an annual record 572.6 million yuan ($92 million) last year, and lost 1.3 billion yuan in the first half of this year.
While Beijing seems intent to promote a shift away from an investment-heavy model, with companies reliant on government cash injections, some analysts say Rongsheng is too big for China to let fail.
Local media reported in July that Rongsheng had laid off as many as 8,000 workers as demand slowed. Three years ago, the company had about 20,000 staff and contract employees. This week, the shipbuilder said an unspecified number of workers had been made redundant this year.
A purpose-built town near the shipyard’s main gate, with thousands of flats, supermarkets and restaurants, is largely deserted. Nine of every 10 shops are boarded up; the police station and hospital are locked.
“In this area we’re only really selling to workers from the shipyard. If they’re not here who do we sell to?” said one of the few remaining shopkeepers, surnamed Sui, playing a videogame at his work-wear store. “I know people with salaries held back and they can’t pay for things. I can’t continue if things stay the same.”
In the shadow of the shipyard gate, workers told Reuters the facility was still operating but morale was low, activity was slowing with the lack of new orders and some payments to workers had been delayed.
“Without new orders it’s hard to see how operations can continue,” said one worker wearing oil-spattered overalls and a Rongsheng hardhat, adding he was still waiting to be paid for September. He didn’t want to give his name as he feared he could lose his job.
“Morale in the office is quite low, since we don’t know what is the plan,” said a Rongsheng executive, who declined to be named as he is not authorized to speak to the media. “We have been getting orders but can’t seem to get construction loans from banks to build these projects.”
While Rongsheng has won just two orders this year, state-backed rival Shanghai Waigaoqiao Shipbuildinghas secured 50, according to shipbroker data. Singapore-listed Yangzijiang Shipbuildinghas won more than $1 billion in new orders and is moving into offshore jack-up rig construction, noted Jon Windham, head industrials analyst at Barclays in Hong Kong.
Frontline, a shipping company controlled by Norwegian business tycoon John Fredriksen, ordered two oil tankers from Rongsheng in 2010 for delivery earlier this year. It now expects to receive both of them in 2014, Frontline CEO Jens Martin Jensen told Reuters.
Greek shipowner DryShips Inchas also questioned whether other large tankers on order will be delivered. DryShips said Rongsheng is building 43 percent of the Suezmax vessels - tankers up to 200,000 deadweight tons - in the current global order book. That"s equivalent to 23 ships, according to Rongsheng data.
Speaking at a quarterly results briefing last month, DryShips Chief Financial Officer Ziad Nakhleh said Rongsheng was “a yard that, as we stated before, is facing difficulties and, as such, we believe there is a high probability they will not be delivered.” DryShips has four dry cargo vessels on order at the Chinese firm.
Rongsheng declined to comment on the Dryships order, citing client confidentiality. “For other orders on hand, our delivery plan is still ongoing,” a spokesman said.
At least two law firms in Shanghai and Singapore are acting for shipowners seeking compensation from Rongsheng for late or cancelled orders. “I’m now dealing with several cases against Rongsheng,” said Lawrence Chen, senior partner at law firm Wintell & Co in Shanghai.
Billionaire Zhang Zhirong, who founded Rongsheng in 2005 and is the shipyard"s biggest shareholder, last month announced plans to privatize Hong Kong-listed Glorious Property Holdingsin a HK$4.57 billion ($589.45 million) deal - a move analysts said could raise money to plug Rongsheng"s debts.
Meanwhile, Rongsheng’s shipyard woes have already pushed many people away from nearby centers, and others said they would have to go if things don’t pick up. Some said they hoped the local government might step in with financial support.
The Rugao government did not respond to requests for comment on whether it would lend financial or other support to Rongsheng. Annual reports show Rongsheng has received state subsidies in the past three years.
HONG KONG, July 5 (Reuters) - China Rongsheng Heavy Industries Group, China’s largest private shipbuilder, appealed for financial help from the Chinese government and big shareholders on Friday after cutting its workforce and delaying payments to suppliers.
Hours after China Rongsheng made its appeal in a filing to the Hong Kong stock exchange, where the company is listed, Beijing vowed to bring about the orderly closure of some factories in industries plagued by overcapacity.
The statement by the State Council, or cabinet, laid out broad plans to ensure banks support the kind of economic rebalancing Beijing wants as it looks to focus more on high-end manufacturing. It did not mention any specific industries or companies and there was no suggestion it was referring to Rongsheng.
China Rongsheng said it was expecting a net loss for the six months that ended June 30 from a year earlier, according to the filing. It gave no figures.
Rongsheng shares plunged 16 percent to a record low in heavy turnover on Friday, leaving its market capitalisation at just under $1 billion. The Hang Seng Index climbed 1.9 percent. China Rongsheng is down 28.2 percent on the year.
In its filing, China Rongsheng said some workers had been made redundant, although it gave no numbers or timeframe for the losses. The company did not immediately respond to requests for more information.
China Rongsheng has said it won only two shipbuilding orders worth $55.6 million last year when its target was $1.8 billion worth of contracts. This year, it received orders to build two drilling rigs used in oil exploration, worth $360 million.
“Shipyards are a lot like banks, confidence matters ... Any yard anybody is worried about is going to find it very difficult to get new orders,” said Jon Windham, Barclays head of Asia industrials equity research.
While the Chinese shipbuilding industry faced “unprecedented challenges”, China Rongsheng’s board was confident management could ease pressure on working capital in the near future and maintain normal operations, the company said in the filing.
According to its December 2012 annual report, issued on March 26, China Rongsheng’s cash and cash equivalents fell to 2.1 billion yuan from 6.3 billion yuan a year ago.
“The group is ... actively seeking financial support from the government and the substantial shareholders of the company, and increasing its efforts in negotiations with its customers to maximise the collection of receivables,” China Rongsheng said in the filing.
A note from Macquarie Equities research said the statement highlighted the “severity” of China Rongsheng’s liquidity problems, adding this was not necessarily representative of the wider sector.
It said other listed Chinese shipyards were not as leveraged as China Rongsheng. The loan from Zhang was a surprise, it said, showing how badly the company needed cash.
“Rongsheng will need to address the problems immediately to reassure the market,” said Martin Rowe, managing director of Clarkson Asia Limited, a global shipping services provider.
The holding orders of Chinese shipyards dropped 23 percent in the first five months of this year compared with a year earlier, according to the China Association of the National Shipbuilding Industry. New orders dropped to a seven-year low in 2012. ($1=6.1258 yuan) (Additional reporting by Yimou Lee and Twinnie Siu in Hong Kong and Keith Wallis in Singapore; Editing by Dean Yates)
[Press Release]CHINARONGSHENGHEAVYINDUSTRIES 400,000 DWT VLOCNAMED AND LAUNCHED* * * *LOWERSCOST FORVALE ANDFORGESLONG-TERMCOOPERATIONFIRSTVLOCS TOBEDELIVERED SOON
(10 July 2011, Hong Kong) China Rongsheng Heavy Industries Group Holdings Limited (China Rongsheng Heavy Industries or the Group; stock code: 01101.HK), a large heavy industries group in China, and Vale S.A. (Vale), the largest global iron ore supplier from Brazil, held a naming and launching ceremony on 9 July for the first-ever 400,000 DWT Very Large Ore Carrier (VLOC) built in China. This new VLOC, named VALE CHINA, is the first VLOC of a few to be delivered in the coming two years. The new vessel can significantly lower overall delivery costs of iron ore for Vale. The attendance of Vales new Chief Executive Officer underscored the long-term cooperation between a major shipbuilder and ship owner.
Mr. Chen Qiang, Chief Executive Officer of China Rongsheng Heavy Industries, and Mr. Murilo Ferreira, the new Chief Executive Officer of Vale, attended the ceremony. The Brazilian ambassadress was the godmother in the naming ceremony. Mr. Chen Qiang said, The early christening of VLOC as VALE CHINA reflected the dedication and importance of the cooperation of both parties, as well as Vales strong interest in collaborating with Chinese companies.
As the largest private shipbuilder in China, China Rongsheng Heavy Industries is one of the few shipbuilders in the world with the ability to build VLOCs of 400,000 DWT or larger. Within its shipbuilding segment, VLOCs account for the highest proportion of the contracts on hand in terms of contract value, thus the naming and launching of VALE CHINA has special significance for the Groups future development.
The 400,000 DWT VLOC launched is currently the worlds largest dry bulk carriers. It is a high-tech vessel self-developed by the Group, representing the worlds most advanced technology in very large bulk carriers. The vessels main engine was self-built by China Rongsheng Heavy Industries, which is a low-speed diesel engine with the maximum power manufactured by Chinese enterprise independently so far.
As the largest iron ore supplier and exporter in the world, Vale is not only one of China"s major iron ore suppliers, but also the largest customer of China Rongsheng Heavy Industries. This visit fully affirmed the capability of China Rongsheng Heavy Industries in constructing very large vessel. Vale is seeking to enhance production capacity to meet the increasing demand from Asia. After the delivery of the 400,000
10 July 2011 / Page 3Photo 1: Mr. Chen Qiang, Chief Executive Officer of China Rongsheng HeavyIndustries, giving a speech in the naming and launching ceremonyPhoto 2: The naming and launching ceremony ofChinas first-ever 400,000 DWT VLOC VALE CHINA
Established in 2005, China Rongsheng Heavy Industries advanced to become a market leader in the Chinese shipbuilding industry within five years. According to Clarkson Research, China Rongsheng Heavy Industries was the second largest shipbuilder and the largest privately-owned shipbuilder in the PRC in terms of total order book measured by DWT as of end of 2010, and had the largest shipyard in the PRC. China Rongsheng Heavy Industries was also a global leader in manufacture of VLOCs of over 400,000 DWT. Headquartered in Hong Kong and Shanghai, China Rongsheng Heavy Industries has production facilities in Nantong of Jiangsu Province and Hefei of Anhui Province. Currently, China Rongsheng Heavy Industries business spans four segments: shipbuilding, offshore engineering, marine engine building and engineering machinery. Rongsheng products include bulk carriers, crude oil tankers, containerships, offshore engineering products, low-speed marine diesel engines and small to mid-size excavators for construction and mining uses. It has established strategic cooperations with renowned international classification societies including DNV, ABS, LR, GL and CCS, and has built a customer base including enterprises such as CNOOC, Vale, Geden Line, Cardiff Marine Inc., MSFL and Frontline Ltd. The Groups products have been sold to 11 countries and regions including Turkey, Norway, Germany, Brazil, Singapore and China.For press enquiries:China Rongsheng Heavy Industries Group Holdings Limited
This press release was issued by China Rongsheng Heavy Industry Group Co. Ltd. and was initially posted at 2012-03-20 23:03:08 PM. The issuer is solely responsible for the accuracy of the information contained therein.
The world coal and iron ore trade demand depends very much on the biggest purchaser China. Coal import increased to 100 million tons in 2009 and tends to rise upwards until 2020. In 2009, iron ore import demand to China reached 2/3 of the world’s iron ore trade. The second biggest purchaser in the world is India that is looking for new suppliers in Russia and Latin America seeking to fill increased needs. Despite the fact that bulker market shows recovery signals since the end of 2009 the nearest future of shipbuilders focused on bulker carriers is not yet safe. During the first four months of 2010, it contracted 185 new bulk carriers (15 million dwt). Though prices of new building incentives have fallen by 30% the order book for 2010-2014 is overfilled: 3286 new bulkers (43.6% of existing bulker fleet) totalling 287.1 million dwt (59.7%)(CESA AR, 2010). This means that shipyards of China, S. Korea, Japan and new players focused on production of bulkers should turn to the building of other ship types. Consequently, the competition among high added value shipbuilders should be more intense.
Such a danger as “tenth wave” is poising now over the global shipbuilding industry. What shipyards of what countries will survive it? It might be that some countries will decide to reduce shipbuilding capacity or even close it before their shipyards collapse.
Productivity is influenced by technology, facilities, management competence, work organization, work practice, the level of workers’ skills and motivation. The level of the shipyard’s technology is one of the most important factors influencing the cost competitiveness, especially for the large enterprise.
Technology benchmark provided by T. Lamb shows very interesting results forcing to think what is more valuable for the shipyards competing in the market. It compares typical production elements such as steelwork and outfitting production, other pre-erection, ship construction, layout & environment, design & drafting, and organisation/operating of the main shipbuilding countries/regions. The highest overall level has Japan (4.43), the second – S. Korea (4.00), then Europe (3.4), and the lowest is of China (2.88) (Lamb, 2007). Is China a winner just because of low labour price? Or is Chinese labour cost lower because of small investment? Another reason impacting (more specifically – distorting) the competitiveness of shipyards is State support that goes to increasing of the national shipbuilding capacity. For example, over the past decade Korea almost quadrupled its production capacities while Japan and Europe kept stable production volumes. Since 1998 to 2009, S. Korean shipbuilding capacity grew by 10.8 million CGT and Chinese - by 7.9 million CGT (ECORYS SCS, 2009). China and S. Korea continues to follow a highly aggressive expansion path. Under Chinese "Shipbuilding industry adjustment promotion plan" the government has defined provision of operating funds to shipyards and expansion of financial support to owners who order export ships. Not only these countries but also new players such as Brazil, Turkey, India, etc provide huge amounts of support and financial assistance to their domestic producers by using various forms of subsidies including investment aid, loans and payment guarantees to shipbuilders, suppliers, governmental bailouts, subsidies on ship prices for domestic ocean going ships’ buyers, mandatory requirements to order ships at domestic yards and subsidized loans for domestically built ships, direct loans and debt guarantees to ship-owners, etc.
In such conditions, keeping a competitive edge of European shipyards becomes more and more complicate. Despite of the reduced order book Europe chooses quality and excellence over the low costs as the main strategic point of further development of the shipbuilding industry.
The shipyard, located in the Yangtze River Delta, was founded in 2006, and became the largest private shipbuilder in China, churning out giant valemaxes at its four large dry-docks, before a massive financial collapse forced it to cease operations in 2014.
Broking sources in China tell Splash that the yard’s former chief operating officer David Luan is now preparing to officially reopen the yard, to be known as SPS Shipyard, a reference to ShipParts.com, a business he created in 2015 after quitting Rongsheng.
SPS Shipyard will start to market cape and kamsarmax slots from next week with next available slots being from Q3 2025 onwards. Luan has yet to reply to questions sent by Splash earlier today.
China"s largest private shipbuilder Rongsheng has failed to win any orders so far this year. And 28 percent of Chinese shipyards have received no orders since 2009.
And Chinese shipbuilders have been hit harder than their South Korean counterparts according to Bloomberg. South Korean shipyards have benefited from higher demand for offshore units and drill ships which are more complicated to make.
MV Vale Rio de Janeiro, owned by the Brazilian mining company Vale, is one of the world"s largest very large ore carriers and a sister ship of Daewoo Shipbuilding & Marine Engineering in South Korea and twelve from Jiangsu Rongsheng Heavy Industries in China.Chinamax, these ships are generally referred to as
As of October 2011, Vale plans to set up a transhipment project off Subic bay. In addition to bringing in many more jobs for locals, this is expected to boost other industries in Subic bay, and put Philippines on the world map of Iron ore shipments. It is also expected to boost local industries like travel, hotels ship supplies and provisions.
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