The Chinese COSCO Shipping Heavy Industries will close three of its five shipyards until 2020, released the management of the company and industrial association. The decision was made in connection with the stagnation of production capacities against the background of a decrease in demand in foreign markets. The shipyards in the cities of Nantong (eastern province of Jiangsu), Dongguan (southern Guangdong) and Zhoushan (eastern Zhejiang) will be liquidated until the end of 2020. The reason for the closure is delay in payment from foreign clients, cancellation of newbuilding vessels, as well as sharp decrease in number of new orders. Moreover, the economy growth of Chine causes increasing costs for labor, which increases the debt of the shipbuilder.
“We plan to leave production sites only in the cities of Qidong (Jiangsu Province) and Dalian (Northeast Liaoning), as these shipyards are capable of producing high-tech products, for example, vessels for polar expeditions, oil platforms, specialized vessels for livestock transportation”, said the officials from COSCO Shipping Heavy Industries.
The move to close down the shipyards will effectively optimize valuable resources to cut overcapacity and avoid defaulting orders made by unstable foreign shipowners, as well as prevent price competition between its subsidiaries.
“One of the main reasons for such measures is the chronic deferrals of payments from foreign clients, some of which simply refuse orders. At the same time, foreign order will decrease by 50% – from 18 in 2017 to 9 in 2020”, said the chief engineer of COSCO Shipping Heavy Industries, Liang Yangfeng. “Other negative factors are the fall in oil prices and on finished ships, the growing cost of components and labor”, added he.
COSCO Shipping Heavy Industries was established in December 2016 through the merger of COSCO Shipyard Group, COSCO Shipbuilding Industry and China Shipping Industry. COSCO Shipping Heavy Industries owns six shipyards and operates two joint-venture yards with Japanese Kawasaki Heavy Industries, while its compatriot China Shipping owns five yards.