Reporter Xing Dan

Survival of Shipbuilding Enterprises Under Money Shortage

Reporter Xing Dan

With the extensive spread of the fi nancial crisis, news of shutdown and collapse of domestic shipyards keep coming in without an end. Then, what is the living condition of domestic shipyards? What extent is the money shortage? What kind of enterprises are the favorites of the banks?Of the six major supporting policies of the “Implementation Plan on Shipbuilding Industry to Speed Up Structural Adjustment and Promote Transformation and Upgrading (2013～2015)” (hereinafter referred to as the Implementation Plan) which was issued by the State Council recently, two of them are specifically about the credit support for shipbuilding companies. Whether this will bring the warmth of spring to shipyards?

The misery of private shipbuilding enterprises

At present, as banks tighten loans for shipbuilding enterprises, another batch of once glorious shipyards found themselves in diff i culty due to lack of money. “Money seeking in wilderness”happened to large private shipbuilder RongSheng heavy industry sent out a warning signal that many domestic shipyards are playing the scene of “looking for money in wild land”. Zhou Xiaogen, the head of quality security department of Taizhou Port Shipping Co., Ltd said that most domestic shipyards are short of money now, including our enterprise, whose situation is just relatively better. This is because that the enterprise was very lucky and did not have malicious ship abandonment in previous years, so that the entire operation was good, which has made it possible for the enterprise to use the money earned in previous years to invest in building new ships. Private shipyards with such lucks are few, and even these shipyards worry about money.

From the point of view of the domestic private yards,loan thresholds set by banks are increasingly getting higher. Banks require shipyards to submit various materials, such as ship type, extent of recognition,owner’s advance payment amount, owner’s qualifications and financial resources, report of future development trend of vessel’s route, analysis of the trend of the freight of the shipping line, advance payment etc. Now, many shipowners, under the cashstrapped condition, can only pay 20% advance payment or even lower. With such low advance payment,domestic banks will refuse to loan without hesitation.

The state-owned enterprises have resources to resort to

According to the analysis of a banker in charge of ship financing and leasing business, the government has defined the shipbuilding industry as the one with overcapacity, and banks will slowly retreat from this business. He said that because the shipbuilding industry is mainly export-oriented, and 90% of the export buyer’s credit is controlled by the policy banks including National Development Bank and the Export-Import Bank of China which detest risks and would choose not to make money rather than have bad debts,this makes it diff i cult for private enterprises to obtain loans. Relatively speaking, the state-owned enterprises,especially central enterprises have the resources to resort to. According to statistics, in the first half of this year, the orders for new ships held by Chinese shipbuilding enterprises accounted for 39.5% of the total in the world, and the state-owned shipyards have nearly three-quarters of the contracts. Compared with the coldness faced by private shipbuilding enterprises in financing, for some large state-owned backbone enterprises, it is not a problem to obtain loans from banks. But whether all state-owned enterprises have the preferential treatment? Zhang Guangqin, the President of CNASI pointed out that even for some large stateowned shipbuilding enterprises, if the projects on order are not good, it is unlikely for banks to provide loans.

The true thoughts of banks

“Provide umbrellas on sunny days and collect umbrellas on rainy days” is how the vast majority of shipbuilding enterprises describe banks. For this, the domestic banks also have something to say. Wei Taoli, the marketing director of shipping leasing department of Min Sheng Financial Leasing Co., Ltd said frankly that shipping market capacity is excessive and profits are low,combined with over production and continuous new shipbuilding orders, the recovery process of the industry is fundamentally affected. Along with the strained fl ow of owner’s cash, all these indeed make banks consider carefully before issuing loans to the shipping market.At present, the financial institutions take the shipping industry as a key credit regulation industry, and tighten the credit line for shipbuilding industry. With the rights of some banks having been retrieved to the superior banks, some banks make short-term financing only available to ships which draw the guarantee of these banks, and the financing amount for single ship is limited. In the view of banks, financial institutions,after all, are also enterprises, making profit is their forever pursuit. This series of measures are the means for financial institutions to control risks and achieve self-protection. However, at present, banks’ being careful about loans does not mean that they do not loan.From the perspective of sustainable development of the industry, “emphasized support” actually conforms with the rule of the development for the industry.