No safe harbor for weak shipyards in China

China's shipbuilding sector has stagnated this year, and things won't improve in 2014. The country will continue to lag behind its foreign competitors as prolonged excess capacity continues to crimp industry profits and drive smaller shipyards out. Zhang Guangqin, president of the China Association of the National Shipbuilding Industry, said that heedless expansion of capacity and product lines have severely hurt the industry's health. "Surplus capacity of the world's shipping industry has mounted since the global financial crisis in 2008. The estimated overcapacity of the sector may reach as high as 20 percent this year," Zhang said. "Under the circumstances, it will take at least five years to digest the surplus capacity in China's shipbuilding sector." As the world's largest low-end ship-producing country, China has 1,600 enterprises related to ship construction, half of which are large shipyards. These companies have an annual industrial output of 800 billion yuan ($130.6 billion). A total of 1.5 million people work in the industry, according to the National Development and Reform Commission. "Even though China gained more orders than Japan and South Korea in 2013, new ship prices have kept touching new bottoms in the past two years, and there is no sign of recovery whatsoever," said Yin Zhen, deputy director of the division of transport planning at the Institute of Comprehensive Transportation at the NDRC. China's new ship orders amounted to 46.44 million deadweight tons from January to October, about 46.4 percent of the global market share. Work in progress totaled 118 million DWT, or 45.4 percent of the industry's total, according to the Ministry of Industry and Information Technology. Domestic shipyards, affected by weak design ability and a declining global shipping market, have seen the prices of bulk and container vessels fall by 30 percent or more since 2008.