While the rest of the world maintains coronavirus-related restrictions, China is gradually lifting them. Many factories have already resumed work, hoping to return to the pre-pandemic production level. Chinese shipyards especially find themselves in a difficult situation. To attract more orders, Chinese shipyards are slashing prices on new ships.
Chinese shipyards slash prices on new ships
The COVID-19 pandemic has made its mark on world economies. The shipbuilding industry, which is particularly capital and labor-intensive, has also been deeply affected. Postponement of ship repairs by shipowners, difficult migration of employees, lack of materials and equipment – these are major challenges now. Also, it is not easy to get orders for new ships because ship owners are unsure of how the situation will unfold in the future. Therefore, Chinese shipyards have decided to lower prices. They are offering to sell vessels at discounts up to 20 percent.
The discounts are not limited to one particular type of vessel. Chinese shipyards offer, for example, a bulk carrier kamsarmax (80-85,000 tonnes) for USD 26 million, and ultramax (62-65,000 tonnes) for approx. USD 23.5 million. Ship operators are trying to lower the price even more. Chinese shipbuilders, however, cannot afford more than 20% off because it is too risky given the current situation.
One shipyard revealed that from the previous year to now, orders for more than ten ships had been canceled, and the cumulative loss of revenue has reached CNY 12 million. In addition, Chinese shipyards have a problem with the timely execution of orders placed before the pandemic. That is mainly due to COVID-19 pandemic restrictions such as quarantine and closed borders. Postponing the planned delivery dates means that the shipyards will not receive the last largest part of the payment, amounting to even 70%. That will negatively affect shipyards’ liquidity.
Amidst the current problems, Shipyards in China compete with Korean ones for orders for container carriers. Hapag-Lloyd intends to place a USD 1.2 billion order for six 23,000 TEU ultra-large container vessels. Ocean Network Express (ONE) also plans to place a similar order. Chinese shipyards such as Jiangnan Shipbuilding, Dalian Shipbuilding Industry, China Hudong Zhonghua, Nantong COSCO KHI Ship Engineering and Yangzijiang Shipbuilding are all in the race. The winner’s financial situation will, for sure, improve. It is expected that thanks to the Chinese government’s financing policy, Chinese shipbuilders will win over technologically superior Korean competitors.