China's Shipbuilding Giant Goes Bankrupt As It fails to pay $141 Billion
A court in the eastern province of Zhejiang said it recently accepted a bankruptcy case involving a state-owned shipbuilder, the first government-backed company to go under amid an industry slowdown. Zhoushan Intermediate People’s Court said it accepted a petition filed by Zhejiang Shipping Group regarding the bankruptcy of a subsidiary called Zhoushan Wuzhou Ship Repairing & Building Co. Ltd. The court said it had frozen the assets of Wuzhou Ship Repairing & Building, which was founded in 2001. The shipbuilder had debts of 911 million yuan and total assets of 534 million yuan as of September 30 this year, its financial report showed. Wuzhou Ship Repairing & Building started having financial difficulties last year, a person with knowledge of the matter said. Its parent gave it huge amounts of money only to see the situation worsen this year, the source said.
Wuzhou Ship Repairing & Building is the first state-owned firm to go bankrupt since the shipbuilding industry started slowing last year. A privately owned company, Mingde Heavy Industry Group, went under on July 31. Other state-owned shipbuilders have indicated they are in trouble. Sainty Marine Corp. Ltd. and Wuhu Shipyard Co. Ltd. have both said in December they are on the verge of bankruptcy. Rongsheng Heavy Industries Group, once the country’s largest shipbuilder, stopped production, the private company said in March. Other private firms in the industry that are in trouble include Jiangsu Eastern Heavy Industries Co. Ltd., Zhejiang Judger Shipbuilding Co. Ltd. and Zhejiang Zhenghe Shipbuilding Co. Ltd. The shipbuilding industry has seen orders from abroad decline in 2015. Chinese shipbuilders have seen orders for new vessels fall sharply over the first three quarters of the year, said Li Yanqing, a researcher at China Shipbuilding Industry Corp. The falloff was mainly due to a lack of orders for bulk carriers. Less than 60 orders for the ships were placed around the world in the first seven months of the year, 90 percent less than in the same period of last year, said Clarkson Research Studies, a shipping information provider.
An executive of one private shipbuilder told Caixin that some large builders were keeping operations going simply by taking orders that would yield little or no profit. The shipping industry is correspondingly weak. The Baltic Dry Index (BDI), which tracks the prices of shipping raw materials, stood on 471 on December 17, the lowest figure in three decades. The highest figure – 11,793 – was in May 2008.
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