Author Topic: Chinese Shipyards See Surge in Orders, Margins Remain Thin  (Read 1203 times)

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Chinese Shipyards See Surge in Orders, Margins Remain Thin
« on: January 13, 2019, 01:07:44 AM »
Chinese Shipyards See Surge in Orders, Margins Remain Thin

Costas Paris
March 19, 2018 10:56 a.m. ET

https://www.wsj.com/articles/chinese-shipyards-see-surge-in-orders-margins-remain-thin-1521471364

Orders at Chinese shipyards surged 450% in January and February over the same period a year ago, but a stronger yuan and rising raw material costs will keep profit margins under pressure.

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The rising orders come as shipping is recovering from a multiyear down cycle from a glut of ships in the water and a cycle of price wars that pushed freight rates below break-even levels and sent the majority of ocean-going operators deeply into the red.

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Greek and Chinese owners are among the biggest clients in the dry-bulk and tanker sectors, and they are seeing strong growth in shipping demand for iron ore, coal and petroleum-product cargoes, especially from Asian importers.

But China’s strengthening yuan, which has risen 9% against the dollar over the past 12 months, and an average 10% increase in the cost of ship steel plates, is keeping financial pressure on the Chinese shipbuilders.

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Gross profit margins at Chinese yards hovered around 16% in 2017 from about 25% a year earlier.

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Shipyards around the world, including big builders in China, South Korea and Japan, are still recovering from the shipping industry downturn that sent demand for new ships plummeting over the past three years. The thinning order books led China’s government to press a cost-cutting consolidation in the sector with dozens of smaller yards swallowed up by bigger peers or closing down.

Write to Costas Paris at costas.paris@wsj.com