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Merger Creates Largest Shipbuilder

China's biggest shipbuilding company was created on Friday through a consolidation between two State-owned shipyards in Dalian, a port city in Liaoning Province.


The new firm, based at Dalian Shipyard and Dalian New Shipyard, has been named Dalian Shipbuilding Industry (Group) Co Ltd, with a registered capital of almost 3.4 billion yuan (US$419.7 million).


China Shipbuilding Industry Corp, a central government-controlled conglomerate, is the biggest shareholder of the new company, controlling 75.85 percent.


The remaining shares are held by China Construction Bank's branch in Dalian, China Huarong Asset Management Corp and China Orient Asset Management Corp.


"We aim to make the new company a leader in China's shipbuilding industry amid mounting competition from international and domestic rivals," Sun Bo, chairman of Dalian Shipbuilding Industry, said at the launch ceremony on Friday in the city.


Sun said the company's shipbuilding capacity would reach 2.66 million deadweight tonnages next year and increase to 6 million by 2010 and to 8.5 million by 2020.


Its real output will exceed 2 million tonnages next year and grow to 5 million by 2010 and by 7.4 million 10 years later, he said.


He predicted the company's sales will expand to more than 27 billion yuan (US$3.3 billion) by 2010 and to more than 50 billion yuan (US$6.2 billion) by 2020, from the 10.4 billion yuan (US$1.3 billion) expected in 2006, he said.


According to the company's press release, it will strive to maintain profits next year, despite rising material costs and the impact of the renminbi's appreciation earlier this year in July.


The creation of the firm is seen as a landmark in China shipbuilding industry's expansion plans over the next decade.


Li Changyin, general manager of China Shipbuilding Industry, said the parent group aimed to have a shipbuilding capacity of more than 10 million tonnages with core-business turnover exceeding 80 billion yuan (US$9.9 billion) by 2010.


China Shipbuilding Industry also expects to become one of the world's top 500 multinationals during a five-year period from 2010, Li said.


Dalian Shipyard, built in 1898, had total assets of 5.7 billion yuan (US$703 million) and more than 10,000 employees at the end of 2004.


Total assets of Dalian New Shipyard, formed 15 years ago, stood at 7.4 billion yuan (US$913.5 million) at the end of 2004, employing 5,800 people.


Analysts said consolidations are badly needed for China's fragmented shipbuilding sector to keep up with South Korean and Japanese rivals, which recently began major mergers and acquisitions and are accelerating their forays into the Chinese market.


Last month, South Korea's Hyundai Heavy Industries, one of the world's top shipbuilding groups, announced that it would spend US$14 million in building two research and development centres in China next year.


China is now the world's third biggest shipbuilding country, behind South Korea and Japan, and controls about 12 percent of the global ship market.


There are more than 700 shipyards in China.


According to statistics from China Association of National Shipbuilding Industry, the country's shipbuilding tonnage surged by 47 percent year-on-year to 6.2 million in the first half of 2005.


Meanwhile, China's ship exports amounted to 3.8 million tonnages, up 40 percent from a year ago.


(China Daily December 10, 2005)


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