Consumer sector to spur China shipbuilding

THE long-term sustainability of China’s shipbuilding industry may be supported by the demand to increase domestic fleet based on its strengthening consumer sector, said Lloyd’s Register group strategy director John Stansfeld.

“China’s economic development has been predominantly driven by globalisation where its economic strategy mainly focuses on industrial exports.

'The availability of credit is another major issue' - JOHN STANSFELD

“And the country’s shipbuilding industry has reflected this in its order book with the majority of ships built or on order are contracted by foreign owners.

“But now, with the emergence of a strong consumer base that flourished under the forces of industrialisation, the question is whether China can rely on the purchasing power of its emerging consumers to keep its factories busy and by implication, its demand for raw materials and energy strong, if external demand for manufactured goods remains weak,” he said.

Speaking at the China Shipping Energy Conference in Shanghai recently, Stansfeld said this would, in turn, fuel the demand for more ships for the domestic fleet and helped strengthen its emerging marine supply chain.

“The question is whether the growth potential in the domestic fleet will sustain output levels during this unprecedented downturn and support the development of new maritime capabilities,” he said.

Stansfeld said China’s state planners appeared to believe that part of the solution was in the China Shipbuilding Industry’s adjustment and revitalisation plan in response to the adverse impact of the recession unveiled in February.

He said the initiatives in the six-point plan include a determination to spur demand for new ships by speeding up the replacement of China’s ageing domestic fleet.

“A reduction in the maximum age for coastal trading vessels is one solution being discussed.

A filepic of a shipyard in Dalian. The emergence of a strong consumer base will fuel the demand for more ships for domestic fleet in China. - AFP

“The plan is expected to provide the impetus for a long-awaited structural reform of the industry and its products.

“It will also provide the incentives for expansion-minded shipping companies to buy any ships whose construction might otherwise be terminated by a lack of financing or the inability to negotiate new terms,” he said.

Additionally, Stansfeld said China’s demand for energy and the related raw materials would play a key role in determining its future as a maritime nation.

“The development and sustainability of its maritime sector will be underpinned by the commitment to import energy and other raw materials in Chinese-built, owned, managed and crewed ships.

“The ambition to transport 50% of the country’s energy needs in Chinese-owned and operated tonnage is common knowledge.

“Increasingly, we see Chinese owners and yards investing in oil tankers and their design development growing due to Chinese oil imports,” he said.

However, Stansfeld said, the future of maritime industry was also primarily determined by other factors, most of which were beyond the control of the shipping sector.

“The obvious and principal driver for a recovery is an improvement in global trade, which itself is dependant on the economic health of nations. The price of energy will also be a major factor, influenced by the demand of the revitalised economies,” he said.

Stansfeld said this would, in turn, have an impact on the costs of all manufactured goods and the price of raw materials used in the manufacturing sector. “The availability of credit is another significant issue and influence,” he said.

Source: StarBiz