Asian shipbuilders face an abrupt downturn in demand that could result in some yards going bankrupt as ship owners cancel or postpone orders, according to executives, bankers and analysts.
The problems could be particularly acute in China, which is now challenging South Korea as the world’s leading shipbuilding nation but where many of the new yards are privately owned and rely on additional funding for their expansion.
The shipbuilders’ problems stem from those of both the shipping and banking sectors, as a slowdown in trading is compounded by the inability or reluctance of banks to extend financing for orders. The Baltic Dry Index (BDI), the global benchmark for the cost of shipping commodities, has slumped to a quarter of its level four months ago.
“We see banks withdrawing financing options for new ships,” said Arthur Bowring, managing director of the Hong Kong Shipowners’ Association. “To have built up such a large shipyard capacity is quite worrying in such doubtful economic times.”
Asian shipyards filled their order books until 2011 on the back of a decade-long Asian economic boom. That still provides a cushion for larger and more efficient yards, but some Chinese fledgling companies now scramble to put refund guarantees in place to secure contracts.
“Activity has come off very rapidly right across the board, with the big ships affected most,” said Michael Birley, managing director of shipbroker Wallem. “I’m sure that there are orders now which are not being completed.”
Source: http://www.yourshipbuildingnews.com/news_item.php?newsID=12150
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