Shipbuilder seeks bankruptcy protection
Global Times | Cong Mu - 2012/6/28 0:10:02

Zhejiang Jingang Shipbuilding Co, the largest private shipbuilder in Taizhou, East China's Zhejiang Province, has filed for bankruptcy in a local court and is considering shifting to other businesses as the shipbuilding industry is facing a bleak prospect, a judge of the court told the Global Times yesterday.

"The company filed for bankruptcy in mid-June as it is unable to meet its debt obligations of over 300 million yuan ($47.1 million)," said Yu Shengyue, director of No. 2 Civil Tribunal of the People's Court of Wenling county, where the company is based.

The major creditors include the local branches of Construction Bank of China, Agricultural Bank of China, Bank of China and Zhejiang Materials Industry Group Corp, a State-owned logistics company, according to Yu.

"The debtor and the creditors are considering reorganization, because the shipbuilding industry is not in good shape and the outlook is not optimistic, either. The company still has a ship order to be delivered," he said.

From January to May, China finished construction of 22.5 million deadweight tons of ships, down 10.1 percent year-on-year, and has received new shipbuilding orders for 9.5 million deadweight tons, dropping by 47.3 percent on a yearly basis, according to the statistics released by the China Association of National Shipbuilding Industry on Monday.

"As the global shipbuilding market enters into its most difficult period, China's ship imports and exports have started to sink from a record high level," the China Shipbuilding Information Center said on its website on June 4, citing a report by Beijing-based China Industry News.

Spurred by a national shipbuilding industry revitalization program in 2009 and the need to replace aging ships in China, many private investors in East China made hasty decisions to invest in the shipbuilding sector, underestimating the fallout of the global financial crisis since 2008, Lin Guolong, a professor at Shanghai Maritime University, told the Global Times yesterday.

The European debt crisis has depressed global trade activities and the demand for new dry bulk carriers. Seeing the risks, banks are now reluctant to lend to shipbuilders, who are financially depressed, Lin said.

"Bankruptcy may not be a bad thing, as it can help the industry realign," he said.

Baltic Dry Index, a gauge of international cargo ship demand and supply, fell to 651 on February 6, the lowest point since 2000, foreshadowing a wave of shutdowns of small and medium-sized shipbuilders in China, Shanghai Securities News reported in February. The index recovered to 981 on Tuesday.

"About 40 percent of over 100 ship companies in Taizhou did not receive any new order last year, and most of them could hardly get through to the second half of the year," the newspaper reported, citing Jin Linwen, secretary-general of Taizhou Ship Industry Association.

Although many shipbuilders are shutting down, the court has not received many bankruptcy applications, as local entrepreneurs tend to run away, instead of filing for bankruptcy, said director Yu.