rongsheng cease shipbuilding pricelist

HONG KONG (Reuters) - Jiangsu Rongsheng Heavy Industries Co Ltd has appointed Morgan Stanleyand JP Morganto finalize plans for its long-awaited IPO in Hong Kong, aiming to raise up to $1.5 billion in the fourth quarter, sources told Reuters on Tuesday.

This is Rongsheng’s latest bid to go public after it failed to raise more than $2 billion from a planned IPO in Hong Kong in 2008, mainly as a result of the global financial crisis.

Rongsheng"s early main shareholders included an Asia investment arm of Goldman Sachs, U.S. hedge fund D.E. Shaw and New Horizon, a China fund founded by the son of Chinese Premier Wen Jiabao.

The three investors sold off their stakes in Rongsheng for a profit early this year, said the sources familiar with the situation. Representatives for the banks, funds and Rongsheng all declined to comment.

Rongsheng’s revived IPO plan comes at a challenging time. Smaller domestic rival, New Century Shipbuilding, slashed its Singapore IPO in half last week, planning to raise up to $560 million from the originally planned $1.24 billion due to weak market conditions.

After the reduction of the number of shares offered, New Century Shipbuilding’s offering price represents a multiple of 6.5 times to 7.9 times forecast earnings for 2010.

Given uncertainty in the global shipbuilding business environment as well as growing concerns over a huge flow of fund-raising events in Hong Kong, investment bankers suggest the potential size for Rongsheng could be $1 billion to $1.5 billion, according to the sources.

Rongsheng is seeking to tap capital markets to fund fast growth and aims to catch up with bigger state-owned rivals such as Guangzhou Shipyard International Co Ltd.

Rongsheng won a $484 million deal to build four ships for Oman Shipping Co last year. The vessels would carry exports from an iron ore pellet plant in northern Oman which is expected to begin production in the second half of 2010.

(Bloomberg) — China Rongsheng Heavy Industries Group Holdings Ltd., which hasn’t announced any 2012 ship orders, may find winning deals even harder as a company owned by its billionaire chairman faces an insider-trading probe.

Rongsheng, based in Shanghai, has tumbled 87 percent since a November 2010 initial public offering because of concerns about delivery delays and a global slump in ship orders caused by a glut of vessels. The shipbuilder, which operates facilities in Jiangsu and Anhui provinces, also said yesterday that first- half profit probably dropped “significantly” because of falling prices and slowing orders.

The probe won’t affect day-to-day operations run by Chief Executive Officer Chen Qiang, as Chairman Zhang only has a non- executive role, Rongsheng said in a statement yesterday. Zhang wasn’t available for comment yesterday, according to Doris Chung, public relations manager at Glorious Property Holdings Ltd., a developer he controls.

Chen isn’t aware of Zhang’s personal business dealings and he has no plans to leave Rongsheng, he said yesterday by text message in reply to Bloomberg News questions. The CEO may help reassure potential customers as he is well-known among shipowners, said Lawrence Li, an analyst at UOB Kay Hian Holdings Ltd.

Zhang owns 46 percent of Rongsheng and 64 percent of Glorious Property, according to data compiled by Bloomberg. The developer dropped 1.7 percent to close at HK$1.16 in Hong Kong today after falling 11 percent yesterday. Zhang’s listed holdings are worth about $1.2 billion, according to data compiled by Bloomberg.

Zhang, who holds a Master’s of Business Administration degree from Asia Macau International Open University, started in building materials and construction subcontracting before getting into real estate. Construction of his first project, in Shanghai, began in 1996, according to Glorious Property’s IPO prospectus. He got into shipbuilding after discussing the idea with Chen at a Shanghai Young Entrepreneurs’ Association event in 2001, according to Rongsheng’s sale document. He formed the company that grew into Rongsheng three years later.

“People in his hometown think Zhang is a legend as he expanded two companies in different sectors so quickly,” said Ji Fenghua, chairman of Nantong Mingde Group, a shipyard located next to Rongsheng’s facility in Nantong city, Jiangsu province. The billionaire maintains a low profile, said Ji, who has never seen him at meetings organized by the local government.

Rongsheng raised HK$14 billion in its 2010 IPO, selling shares at HK$8 each. The company’s market value has fallen by about $6.1 billion to $1 billion, based on data compiled by Bloomberg.

Rongsheng, which also makes engines and excavators, had outstanding orders for 98 ships as of June 2012, according to Clarkson. It employed 7,046 people at the end of last year, according to its annual report. The shipbuilder has built a pipe-laying vessel for Cnooc and it has a strategic cooperation agreement with the energy company.

With orders for new ships plunging to an eight-year low in 2012, China Rongsheng Heavy Industries Group Holdings Ltd. and its local rivals are foraying into the offshore business, lured by a market that will reach about $328 billion in 2017. The new entrants are lowering prices to grab contracts, hurting margins at Singapore-based Keppel Corp. and Sembcorp Marine Ltd., the world’s two-biggest rig makers.

China Rongsheng, the nation’s biggest yard outside state control, announced in October its first order to make a tender barge and rival Yangzijiang Shipbuilding Holdings Ltd. got its first rig contract last month. Shanghai-based China Rongsheng warned in December of posting a loss in 2012 after three straight years of profits.

About 464 shipyards in China won 18.7 million deadweight tons of orders worth $14.3 billion last year, the lowest since 2004, according to Clarkson. That compares with contracts for 14.6 million tons worth $29.6 billion received by 88 yards in South Korea, the world’s second-biggest shipbuilding nation.

China Rongsheng said it has set up an offshore unit in Singapore, where the company has hired engineers with more than 20 years of experience. That “will help compensate Rongsheng China’s lack of experience in building rigs and drill ships and shorten the company’s learning curve,” it said in an e-mail.

Cosco Corp. Singapore Ltd., the shipbuilding unit of China’s biggest shipping company, said in August it expects to incur higher costs as it worked on offshore projects it had never done before. That includes a contract to build a semi- submersible accommodation rig.

Rongsheng Heavy Industries Group Holdings Ltd"s shares have been suspended on the Hong Kong Stock Exchange after a media report said that the company cut 8,000 jobs in recent months.

Rather than building cheap bulk carriers, many Chinese shipbuilders are keen to upgrade their product focus from shipbuilding to offshore engineering products, such as offshore drilling rigs, wind turbine installation vessels and offshore pipe-laying vessels.

Last year, Rongsheng Offshore & Marine was established in Singapore to seek new market growth points. Its business segments include shipbuilding, offshore engineering, marine engine building and engineering machinery.

"Due to the low pre-payment rates and delayed deliveries, many shipbuilding companies in Shanghai, Nantong and Zhoushan are experiencing a shortage of capital. Banks are not willing to lend to shipbuilding companies because they"re fully aware of how sluggish the business is. Shipbuilding is listed as a high-risk industry by banks," Meng said.

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.

Last October, the company entered into an agreementto sell 98.5% equity interest of Rongsheng Heavy Industries, the entire interest in Rongsheng Engineering Machinery, Rongsheng Power Machinery and Rongsheng Marine Engineering Petroleum Services, to Unique Orient, an investment holding company owned by Wang Mingqing, a creditor of Huarong Energy, for a nominal price of HK$1.

Once the largest private shipyard in China, Rongsheng ceased shipbuilding operations in 2014 after it was hit by a major financial crisis and the shipyard rebranded into Huarong Energy in 2015.

Huarong Energy is of the view that the shipbuilding and engineering business is unlikely to see a turnaround in the foreseeable future and it is in the best interests of the company to dispose of the business and focus its resources on energy.

In the 1940s the world moved on from Colonial System to Globalisation. This movement was accompanied by rapidly growing trade and the need for effective means of transport and its systems. Shipping industry has explored every chance and anchored in the world trade. Over the 50 years, seaborne trade grew by 64 per cent faster than GDP (Stopford, 2007). The growth was not stable: 1960-1975 seaborne trade was driven well above GDP trend due to increased consumption of raw materials by industries of Europe and Japan; in 1980-1996, sea trade was below GDP trend because of two oil crises of 1973 and 1979; 1997-2005 seaborne trade was above world GDP due to the growth of Asian countries. In 2008, before the crisis, maritime nations imported 2.7 billion tons of energy commodities (oil, coal and gas); 500 million tons of agricultural product (grain, fertilizer sugars, etc); 1 billion tons of raw materials (Stopford, 2007). The development of new technologies for communication (telephone, telex, fax, email, and world wide web), fast travelling (air transport), globalized materials and market supply (opening new energy sources, reducing transport costs by developing special types of ships, mechanized cargo handling, containerization), and business models (newly-developed flags, long-term time charters) assisted successful growth of the seaborne trade. In this context, the development of shipbuilding industry also wasn’t monotonous. Let follow briefly what caused changes.

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.

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.

KEEP IN TOUCH MARINE NEWSChinaYour e-Paper-newsflash on: >> Economics & Trade >> Shipping Companies >> Shipbuilding >> China Portsin the Asia-Europe trade soon afterdelivery in April. The remainder, alsoaround 366m long and 48.2m wide, andhaving a maximum speed of 23.7k, willbe delivered this year and next.According to Lloyds List Intelligence,the last two will be delivered in January2013 and March 2013.As Hanjin provides vessels in theCKYH Alliance"s loop 1 and loop 6(there is no loop 5 yet), which currentlydeploy nine vessels averaging10,400TEU and ten vessels averaging9,081TEU respectively, they will,presumably, be used to upgrade these.Alternatively, they could be used inloop five, when it is re-introduced,although there appears little need forthis at present. Given Europe"slanguishing economy, there is unlikelyto be need for any additional capacitythis year, which underlines thedifficulty faced by carriers with ULCVsdue for delivery in 2012. (Source: JOC)>> ShipbuildingChinese ShipbuildingIndustry at a turningpoint>>Shanghai: Under troubled market,Chinese shipbuilding industry appearsto make alterations according tochanging times and circumstances.Chinese shipbuilders are active in upgradingcommercial ship, as well aswinning orders for offshore facilities,high-value vessels, green ship, etc,according to the China Association ofthe National Shipbuilding Industry(CANSI).For instance, Shanghai WaigaoqiaoShipbuilding (SWS) inked four180,000-dwt eco-friendly bulkers fromU-Ming Marine Transport, whichreduced fuel consumption by 15%. Also,Yantai CIMC Raffles Offshore bookedan order for one semi-submersible riglast month.This represents that Chinese marineindustry takes actions against recentdepression in the market, changes indemand and new environmentalregulations. Moreover, Chinesegovernment makes up and carries outpolicies which boost domestic demand.Statistics reported from CANSI said,during January-February period, 57numbers of China"s major shipbuildingand shipbuilding-related companies seedecreased revenue by 7.3% to US$5.33billion year-on-year, while net profitfell to US$288.37 million, down by26.2%.Meanwhile, faced with depressed bulkermarket by February this year, acumulative 22 vessels of 1.18m dwtbulkers have been cancelled, 0.8% oforderbook as of the end of February and61.1% of overall orders cancelled in2011. During the same period, China"smajor yards" ship repair stood at 512vessels, down by 1% year-on-year.Major yards have declined overallrevenue and average net profit by 15%and 35% each.CANSI analyzed that slow recovery inglobal economy and newbuilding pricebeing unlikely to hike caused largescalestructuring of Chineseshipbuilding industry. Despite anestimated 70m-dwt delivery for 2012,relatively slow ordering activity wouldkeep orderbook sliding.Also, most of newbuildings scheduledfor delivery this year had been orderedin low-margin after global financialcrisis in 2008. Thus, shipbuilders wouldsee decrease in earnings. (Source: Asiasis)Rongsheng plans todeliver 10 giant oreships to Vale this year>>Hangzhou: China Rongsheng HeavyIndustries Group Holdings, thecountry"s largest non-state-ownedshipbuilder, said it planned to deliver 10very large vessels to Brazilian mininggiant Vale this year.Rongsheng delivered the first of the 12very large ore carriers (VLOCs), thelargest bulk carrier in the world, orderedby Vale in November but the secondand third were delayed to March orApril from last year, chief executiveChen Qiang told reporters at a resultsbriefing.Vale"s plan to cut transport costs with afleet of giant "Valemax" (VLOCs) raninto trouble in January after Chinarefused to allow the 400,000deadweight ton (dwt) vessels to dock atits ports, triggering concerns that Valemay have to delay or cancel its VLOCorders. But Chen said most of theVLOCs ordered by Vale will bedelivered this year. "There maybeleaving one to be delivered next year, atmost," he added.Rongsheng also has orders to build fourVLOCs for Oman Shipping Co, whichwill charter the ships to Vale.The shipbuilder, which has been hit byrising yuan and a supply glut amid ashipping industry downturn, posted aflat net profit of US$272.97 million for2011. It missed consensus forecast ofUS$384.07 million from 11 analystspolled by Thomson Reuters I/B/E/S.There had been delay delivery of morethan 10 vessels last year due to theEuropean debt crisis and revenue fromEuropean clients fell 34 percentagepoints to 19 % of total in 2011, Chensaid.Rongsheng obtained orders for 39 newvessels worth US$1.8 billion in 2011,down from orders for 46 vessels worthUS$2.26 billion the previous year.However, it outperformed the industryas new orders received by Chineseshipbuilders decreased more than 58%to 29.3 million dwt last year."The market will continue to be toughin the first half and should improve inthe second half as the Europe debt crisiseases," Chen said.Rongsheng will actively seek upgradingand restructuring of its productofferings to help counter the currentmarket downturn, he added. (Source: Reuters)© 2012 SONSEC GMS (HK) Ltd. – Hong Kong (P.R. China) - 3 -

KEEP IN TOUCH MARINE NEWSChinaYour e-Paper-newsflash on: >> Economics & Trade >> Shipping Companies >> Shipbuilding >> China PortsYangzijiang plansrebirth as “All-aroundMaritime Group”>>Nanjing: China"s JiangsuYangzijiang Shipbuilding plans to bereborn as an "All-around MaritimeGroup", by business diversification inorder to make a long-term development.China"s one of largest private-ownedYangzijiang has divided its businessesinto three different group - Mainbusiness (shipbuilding), Base business(offshore, large-size steel structure andship repair) and Supplementarybusiness (ship lease, real estate andfinancing) - for the last five years.As for the offshore business,Yangzijiang established joint venturecompanies each in Singapore and Chinawith Qatar company. The Qatar firmwould firstly place an order for twodrilling platforms at the JVs, withtechnical matters under discussion.Yangzijiang plans to expand its shiprepairing capacity of 200,000 ldt to600,000 ldt, 15 vessels in terms ofVLCC), by having the whole JiangsuHuayuan Metal Processing andJingjiang City Dunfeng Ship Dismantleunder its arm. During December 2011,Yangzijiang has acquired additional80% shares of Jiangsu Huayuan, whichis a parent company of Dungfeng ShipDismantle, with US$38 million)invested.Other businesses such as ship lease, realestate and financing are activelyoperated now.Chairman Ren Yuanlin, Yangzijiangsaid that Yangzijiang will focus onshipbuilding business as well, while itdiversifies and expand into otherbusinesses, which would be a win-winfor every business. (Source: Simic)Jiangnan Shipyardpenned order for twoice-class bulkers>>Shanghai: Diana Shipping of Greecehas penned a US$58 million order toconstruct a pair of ice-class panamaxbulkers at China Shipbuilding TradingCo and Jiangnan Shipyard under CSSCumbrella.The New York-listed owner says itexpects the 76,000-dwt ice-class vesselsto hit the water in the fourth quarter of2013.Brokers say the US$29 million price tagrepresents a “modest” US$1 milliondiscount when compared to the currentmarket average for similarnewbuildings and is US$6 millionabove than what an owner might pay forfive-year-old panamax second-hand.The orders appears to reflect a growingappetite for modern ice-class vessels ina market overburdened with ageingtonnage that has become increasinglydifficult to trade due largely to theglobal capacity glut.There has been an increase of interest inbuilding ice-class bulk carriers of late,with recent orders including a quartet ofice-class 1A 76,000-dwt panamaxesordered by compatriot owner DryShipsat a cost of US$34 million a piece atRongsheng Heavy Industries in Chinafor delivery in 2014. (Source: Asiasis)>> China PortsGuangxi to spend US$2.21bn to reach 160mtonnes port capacity>>Nanning: Guangxi AutonomousRegion plans to spend US$2.21 billionon waterway traffic projects this yearwith Beibu Gulf port capacity to beincreased to 160 million tonnes, whileXijiang River"s cargo capacity to rise100 million tonnes, Xinhua reports.This year, Guangxi plans to build theNo 403 to No 407 berth at the port ofFangcheng and the No 3 and No 4 berthin the Beihai"s Tieshan port area.Meanwhile, Guangxi will alsoaccelerate construction at the port ofQinzhou"s Jingujiang River navigationalchannel and the No 1 to No 3 berth atDalanping port area.Fangcheng port"s berth project will takeup 41 % of the total investment. Beihaiport"s berth project will take up 78 %.Qinzhou"s Jingujiang river navigationalchannel will account for 8.5 %.Dalanping port area"s berth project willtake up 3.9 %.In the meanwhile, Guangxi plans tocomplete the construction of XijiangRiver"s distribution network, portNanning"s Niuwan operation area phase1 of the project and the port of Laibin"sBingang operation area in phase 2 of theproject this year. (Source: Simic)China MerchantsHoldings 2011 profitdown 5.2%>>Hong Kong: Chinese port operatorChina Merchants Holdings(International) Co. said its 2011 netprofit fell 5.3% due to risingadministrative expenses and financecosts, MarketWatch reports.The blue chip company, a unit of stateownedChina Merchants Group, said itsnet profit for the 12 months ended Dec.31 was US$717.22 million, down fromUS$757.14 million a year earlier.Revenue rose 63% to US$1.22 billionfrom US$748 million.The company recommended a finaldividend of US$0.0876, down fromUS$0.10 a year earlier. ChinaMerchants is the largest containerterminal operator by volume inShenzhen, mainland China"s secondbiggestport by volume after Shanghai.(Source: MarketWatch)------------------------------------------------Not happy with us?In that case we have to improve our servicequality and hope to see you back soon …UNSUBSCRIBEEdited and published by:SONSEC GMS (HK) Ltd. – Hong Kong (P.R. China)www.sonsec.cominfo@sonsec.comNote: This e-paper / newsletter is free ofcharge and was permitted and subscribed toby you or a third party underwww.sonsec.com or at prior notification.© 2012 SONSEC GMS (HK) Ltd. – Hong Kong (P.R. China) - 4 -