On April 2, a reporter from the China Securities Journal learned from the China National Shipbuilding Industry Association that the “Industry Action Plan for the Shipbuilding Industry during the Last Three Years of the 12th Five-Year Plan,” jointly formulated by multiple government departments, will be released soon. The plan proposes to give preferential policy treatment to key shipbuilding enterprises, providing them with necessary support in fiscal, tax, and financial areas. At the same time, it aims to guide the shipbuilding industry in conducting research and development of core technologies and to move into high-end, environmentally friendly, and deepwater offshore engineering fields.
Analysts point out that as the benefits of marine policy are increasingly distributed, the share of offshore oil production is steadily rising, and marine development will receive greater attention, potentially driving rapid growth in demand for offshore engineering equipment. Coupled with the current limited number of offshore engineering vessels and their relatively long service lives, it is expected that in the coming years there will be substantial room for growth in both the demand for building new offshore equipment and the need to upgrade existing equipment.
Policy Support
In March of last year, the “12th Five-Year Plan for the Shipbuilding Industry” proposed that by 2015, the shipbuilding industry’s sales revenue would reach 1.2 trillion yuan, and total exports would exceed 80 billion U.S. dollars. Industry insiders generally believe that achieving the development goals set forth in the “12th Five-Year Plan” for the shipbuilding sector will be quite challenging, making it necessary to significantly strengthen policy support for the shipbuilding industry and accelerate the structural adjustment of the shipbuilding sector.
It has been revealed that the forthcoming “Industry Action Plan for the Shipbuilding Industry during the Last Three Years of the 12th Five-Year Plan” will propose encouraging increased financial support for the shipbuilding industry and boosting the allocation of buyer’s credit funds for ship exports. The plan will also call for vigorous development of specialized vessels such as offshore engineering equipment and chemical tankers, as well as key products like low-speed diesel engines and marine diesel engine crankshafts, thereby comprehensively enhancing market competitiveness. Furthermore, the plan will strengthen entry restrictions for shipbuilding enterprises, encourage mergers and acquisitions or collaborative partnerships, accelerate the integration of shipbuilding infrastructure resources, and optimize the spatial layout of the shipbuilding industry. It will also actively promote the development of supporting industries and the ship equipment market, enhance the capability to supply ship components, and extend the shipbuilding industrial chain. Shipbuilding enterprises will be encouraged to adopt modern shipbuilding models, reform their approaches to product design, production, and management, shorten shipbuilding cycles, and improve safety and clean production standards. Finally, the plan will focus on long-term development and build up advanced manufacturing capabilities for the shipbuilding industry.
Marine business shines.
Affected by the economic downturn both at home and abroad, the traditional shipbuilding industry has seen a sustained decline in prosperity over the past few years. However, the offshore engineering equipment manufacturing sector has been experiencing rapid growth. In early March, Dalian Shipbuilding Industry Company, a subsidiary of China Heavy Industries, secured a contract from Seadrill to build four high-specification self-elevating drilling platforms, with a contract value approaching 900 million U.S. dollars. According to data from China Heavy Industries, from the end of November 2012 to March 6, 2013, the company’s newly awarded offshore engineering orders totaled 8.28 billion yuan. On March 25, Rongsheng Marine, a subsidiary of Rongsheng Heavy Industries, signed a turnkey contract for the construction of a large-scale self-elevating drilling platform, with a total contract value exceeding 360 million U.S. dollars.
Analysts point out that Chinese shipbuilding companies are showing a clear upward trend in securing orders for offshore drilling vessels and equipment. In addition to the increasing number of self-elevating drilling rigs being ordered for use in relatively shallow waters, these companies are also steadily accelerating their pace of securing orders for deepwater drilling vessels and mobile drilling platforms. “High oil prices are sparking another wave of development in the offshore engineering sector,” noted analysts at Everbright Securities. The trend in new drilling rig orders closely mirrors the trajectory of oil prices. Currently, most of the drilling rigs already delivered and in operation were ordered when oil prices were above $60 per barrel. As of April 1, international oil prices had closed at $97.07 per barrel. Analysts expect that persistently high global oil prices will lead to a substantial surge in drilling rig orders.
