rongsheng cease shipbuilding free sample

HONG KONG (Reuters) - Shares in China Rongsheng Heavy Industries Group Holdings Ltdtumbled 18 percent on Monday after the U.S. securities regulator accused a company controlled by the shipbuilder"s chairman of insider trading ahead of China"s CNOOC Ltd"sbid for Canadian oil company Nexen Inc.Labourers work at a Rongsheng Heavy Industries shipyard in Nantong, Jiangsu province May 21, 2012. REUTERS/Aly Song

The U.S. Securities and Exchange Commission filed a complaint in a U.S. court on Friday against a company controlled by Rongsheng Chairman Zhang Zhirong, and other traders, accusing them of making more than $13 million from insider trading ahead of CNOOC’s $15.1 billion bid for Nexen.

On Monday, Rongsheng shares dropped as much as 18 percent to HK$1.15, a record low, leaving the company with a market capitalization of just over $1 billion. The company also issued a profit warning, saying first-half earnings would fall sharply as a result of a global shipbuilding downturn, a factor that has already pushed its shares down more than 75 percent in the past year.

Rongsheng - which entered a strategic cooperation agreement with CNOOC in 2010 - said in a Hong Kong filing that it did not expect the U.S. investigation to affect its operations. It said Zhang did not have an executive role in the company.

“The news around the chairman comes on the back of other operational and credibility issues,” Barclays said in a note to clients. “We think China Rongsheng presents significant company-specific risk.”

Zhang was ranked the 22th richest Chinese person by Forbes Magazine in September 2011. But his net worth fell by more than half in the past year to $2.6 billion in March 2012 as shares of Rongsheng tumbled.

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.

Since Beijing appears intent on telling investors it is serious about changing the investment-led growth model of the world’s second-biggest economy and controlling a credit splurge, it may seem like the writing is on the wall for China Rongsheng Heavy Industries Group.

Yet analysts say the government is more likely than not to judge that Rongsheng, which employs around 20,000 workers and has received state patronage, is too big and well connected to fail.

Supporting Rongsheng will not mean China’s economic reform plans are derailed, they say. Instead, it will mean reforms will be gradual and the government will cherry-pick firms it wants to support, which will exclude the small, private shipbuilders that have been folding in waves.

“Rongsheng is a flagship in the industry,” said Lawrence Li, an analyst with UOB Kay Hian in Shanghai. “The government will definitely provide assistance if companies like this are in trouble.”

Analysts say Rongsheng is possibly the largest casualty of a sector that has grown over the past decade into the world’s biggest shipbuilding industry by construction capacity. Amid a global shipping downturn, new orders for Chinese builders fell by half last year. In Rongsheng’s case, it won orders worth $55.6 million last year, compared with a target of $1.8 billion.

Rongsheng appealed for government aid on Friday, saying it was cutting its workforce and delaying payments to suppliers to deal with tightened cash flow.

In the prospectus for its initial public offer, Rongsheng said it received 520 million yuan of subsidies from the Rugao city government in the southern province of Jiangsu, where the company is based.

The state funds paid for research and development of new types of vessels, and were based in part on the “essential role we play in the local economy”, Rongsheng said.

China’s shipbuilding woes are partly of its own making. A global downturn in demand has hammered the sector since 2008, but a national obsession for global dominance in some industries led China to declare in the early 2000s that it wanted to be the world’s top shipbuilding nation by 2015.

A state-induced spike in the number of Chinese shipbuilders followed as the country led a three-fold rise in new global shipbuilding capacity in the past decade.

As the world’s largest shipbuilder, it had 1,647 shipyards in 2012, data from China Association of the National Shipbuilding Industry showed. Over 60 percent of its shipbuilders are based in Rongsheng’s province of Jiangsu.

Despite this, the government is providing support for the industry, a sign it will also support Rongsheng given its prominence in the sector, analysts said.

Analysts say what separates Rongsheng from many other companies are its connections with the government and state banks. Rongsheng’s Chief Executive Chen Qiang, for example, enjoys “special government allowances” granted by China’s cabinet, the firm’s annual reports say.

Rongsheng also said in its IPO prospectus that it has two five-year financing deals with Export-Import Bank of China that end in 2014 and in 2015, and a 10-year agreement with Bank of China starting from 2009.

After all, local government coffers will suffer the biggest blow if Rongsheng goes bust. The firm had 168 million yuan of deferred income taxes in 2012.

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.

China’s Rongsheng Heavy Industries announced today the delivery of a pair of 380,000 DWT Very Large Ore Carriers (VLOCs); one to Brazilian ore giant VALE SA, and the other to Oman Shipping Company.  These two ships represent the 6th and 7th VLOCs to be delivered by Rongsheng this year and have been christened the Vale Hebei, and Vale Sohar respectively.

Another 4 VLOCs have been launched and are currently undergoing outfitting.  By years end, Rongsheng hopes to deliver at least one or two additional ships to their respective owners.

Despite the ongoing challenges on the shipbuilding industry brought about by the global financial crisis and the European debt crisis, Rongsheng Heavy Industries’ delivery plan has not been readily impacted. After delivering a single VLOC last year, the Group has so far delivered 5 VLOCs this year.  Company-wide, Rongsheng has delivered 15 vessels, represented a volume of approximately 3.14 million DWT, this year.

Rongsheng reports they have delivered 90 percent more capacity this year than last, however there’s no hiding the fact this shipyard hasn’t announced a single new ship order yet this year.  In fact, their stock value is valued at around 12% of what it was worth back in November of 2010 when the shipyard first went public.

Shipbuilding is one of the oldest industries in the United States with roots in the earliest colonial settlements. Shipbuilding quickly became a successful and profitable industry in Massachusetts, with its miles of coastline featuring protected harbors and bays, and extensive supplies of raw materials. The early wooden vessels built for commercial fishing and foreign trade also gave rise to a variety of ancillary trades and industries in the area, including sail making, chandleries, rope walks and marine railways. Shipyards in Essex and Suffolk counties are credited with the invention of the traditional American dory and built those that comprised the renowned Gloucester fishing fleet, helped free the colonies from British rule, strengthened the merchant and naval fleets that made the United States a world power and played pivotal roles in World War I and World War II. Many vessels included in this itinerary were either constructed in Massachusetts or are representative of the types of vessels built and repaired in Massachusetts shipyards.

Early settlements, combined with the abundance of oak forests and nearby newly established sawmills on Cape Ann, played a major role in the emergence of the shipbuilding industry on the Essex and Merrimack Rivers and in areas along the northern Massachusetts coastline during the mid-17th century. A shipbuilding boom in the area commenced around 1710. In the beginning, people built their own boats for fishing and transportation. By the late 18th century, experienced shipbuilders began building a new vessel each winter, fishing it during the summer, and selling the vessel during the fall. Captains traveled from other ports to the town of Essex and contracted for a new vessel because the Essex shipbuilders possessed unsurpassed skill and craftsmanship. Much of the skills required of shipwrights or shipbuilders were obtained through on-the-job-training, and many of the earliest shipyards and boat shops operated as family businesses passed down from generation to generation. Lowell"s Boat Shop in Amesbury, Massachusetts, for example, was originally constructed in 1793, run by several generations of the Lowell family, and is the oldest, continually operating boat shop in the United States.

By the early 1840s, Essex no longer had its own fishing fleet, but had turned to year-round shipbuilding fostering a symbiotic relationship with the successful fishermen in Gloucester. In other words, when Gloucester had successful fishing runs and needed more boats, Essex prospered by supplying the boats. By 1845, shipbuilding in Essex was firmly established. The town became widely recognized as North America"s leading producer of the popular "schooners," which enabled fishermen to sail far offshore and withstand rough seas. These large wooden vessels featured two masts carrying two principal sails supported by booms and gaffs and had one or more triangular head sails rigged to a bowsprit. By the 1850s, 15 Essex shipyards launched more than 50 vessels a year, most of which were built for the Gloucester fleet. A typical Essex shipyard consisted of a plot of land near the water with a few shipways, a shop for yard tools and enough space to store timber. Few shipyards had an on-site office and business was often conducted at the builder"s home. Of the 4,000 vessels built in Essex during its 350-year shipbuilding history, only 5 of the fishing schooners exist today. The Schooner Ernestina and the Schooner Adventure remain in Massachusetts.

Unlike the Essex shipyards that largely produced fishing vessels, other Massachusetts shipyards constructed vessels that played an important role in the birth, growth and continued effectiveness of the U.S. Navy. The Boston Naval Yard built more than 200 warships, and maintained and repaired thousands of others from 1800 to 1974. Upon closing after 174 years of service, 30 acres of the navy yard became part of Boston National Historical Park administered by the National Park Service. The frigate USS Constitution, also known as "Old Ironsides," which is the oldest commissioned warship in the world, and the Fletcher-class destroyer USS Cassin Young are displayed there as representatives of the vessels built and repaired at the shipyard. From humble beginnings in 1884, the Fore River Shipyard in Quincy, Massachusetts quickly grew to become the second largest shipyard in the country and remained a leader in the shipbuilding industry for a century. The Bethlehem Steel Company owned the shipyard from 1925 to 1963, during which time it produced the South Dakota-class battleship USS Massachusetts and the Gearing-class destroyer USS Joseph P. Kennedy, Jr. Both vessels are now displayed at Battleship Cove, the world"s largest naval ship exhibit, located in Fall River, Massachusetts. Also exhibited at Battleship Cove are the USS Lionfish, constructed for use during World War II.

9 Giles, Warren, WTO Finds South Korean Shipbuilding Subsidies Illegal, Bloomberg, March 7, 2005 https://www.bloomberg.com/apps/news?pid=newsarchive&sid=aWE0lGT7qzS0

17 United States Census Bureau, U.S Economic Census 2012, NAICS code 336611 Shipbuilding and repairing. Note that this number is consistent with DoT’s analysis which estimated 107,000 jobs in ship building, The Economic Importance of the U.S. Shipbuilding and Repairing Industry, MARAD, May 30, 2013, available at: //www.marad.dot.gov/wp- content/uploads/pdf/MARAD_Econ_Study_Final_Report_2013.pdf

19 The Economic Importance of the U.S. Shipbuilding and Repairing Industry, MARAD, May 30, 2013, available at ://www.marad.dot.gov/wp- content/uploads/pdf/MARAD_Econ_Study_Final_Report_2013.pdf (page E-2)

21 Congressional Record, U.S. Senate, October 23, 1995 page 28996 which can be found at: https://books.google.com/books?id=HH9KOKGZJJYC&pg=PA28996&lpg=PA28996&dq=how+many+ shipbuilding+jobs+1980&source=bl&ots=Vk5a2XHg1Z&sig=Epr5bJiFlJbJ4cXhpsPyZ7- 53kU&hl=en&sa=X&ei=88dgVdvTCIiryAS8lIGwBQ&ved=0CFEQ6AEwBw#v=onepage&q=how%20m any%20shipbuilding%20jobs%201980&f=false

45 Costello, John and Kavanagh, David, Sun Shipbuilding and Dry Dock Co. A Short History, Sun Ship Historical Society, 2007, available at: https://www.sunship.org/sshs_short_history001.pdf

46 U.S. Department of Commerce, Maritime Administration, Report on Survey of U.S. Shipbuilding and Repair Facilities, 1980, available at: https://www.marad.dot.gov/wp-content/uploads/pdf/1980_- _Report_on_Survey_of_US_Shipbuilding_and_Repair_Facilities.pdf

49 Dorwart, Jeffery, Shipbuilding and Shipyards, The Encyclopedia of Greater Philadelphia, Rutgers University, 2013, available at: https://philadelphiaencyclopedia.org/archive/shipbuilding-and- shipyards/