Dwindling fortunes of shipyards threatens shipping

21 March 2015, Lagos – The dwindling fortunes of shipyards may threaten shipping business across the globe as more of  the shipyards  are hit by low patronage.

As a result, thousands of jobs are on the line as the shipyard mangers go back to the drawing board to come with strategies that would keep them afloat.

Already, China’s biggest shipyard, Jiangsu Rongsheng Heavy Industries Group is now a shadow of itself as piles of rusty steel bars and old ship parts are virtually all that is left of a sprawling shipyard in the Eastern city of Rugao.

About  30, 000 employees’ fate now hang in the balance as the company execute immediate, short and long term measures to reverse its dwindling fortunes in the months ahead.

According to a news outfit, Caixin Online, the shipyard used to employ more than 30,000 people. It was once China’s largest shipbuilder. It is on the verge of bankruptcy. Orders have dried up and banks are refusing credit. Questions have been raised about the shipyard’s business practices, including allegations of padded order books. It is apparently behind on repaying some of the 20.4 billion Yuan in combined debt owed to 14 banks, three trusts and three leasing firms
The fate of the remaining workers now hangs in the balance as they are not sure of when they would receive their entitlements amidst uncertainties in the once blossoming ship yard.

Those with an uncertain future include a worker who cuts steel from abandoned ships into pieces that can be sold for scrap. “We have not been paid since November,” the worker who did not want his name in print for fear of reprisal from his employers told the online news outfit.

It was also gathered that Rongsheng is on the ropes now that it has completed a multi-year order for so-called Valemax ships for the Brazilian iron ore mining giant Companhia Vale do Rio Doce. The last of these 16 bulk carriers, the Ore Ningbo, was delivered in January.

With a carrying capacity of up to 400,000 tons, Valemaxes are the world’s largest ore carriers. Vale hired Rongsheng to build the ships starting in 2008, and has tolerated the shipyard’s slow pace: The Ore Ningbo was delivered three years late.

The firm employees said the Ore Ningbo may have been the shipyard’s last product because no new ship orders are expected and all contracts for unfinished ships have either been cancelled or are in jeopardy.

According to one of the ship yard manager, who asked not to be named, Shipping Corporation of India recently cancelled an order for a 300,000 ton bulk commodities carrier. “And work has been suspended on a 57,000 ton crude oil vessel for Shanghai Northsea Shipping Company.

In the same vein, another manager said he expected “no business after the delivery of the last ship to Vale. Most workers have been dismissed. Management can stay, but their numbers are falling. Their contracts will not be extended after they expire.”

As if the woes of the once flourishing  company were not enough, Rongsheng’s  weak financial position was highlighted by a third-quarter 2014 financial report in which the company posted a net loss of 2.4 billion Yuan. It also reported 31.3 billion Yuan in liabilities, including 7.6 billion Yuan worth of outstanding short-term debt.

Impeccable sources said that Rongsheng’s outstanding debt includes six billion Yuan owed the Bank of China and two billion Yuan it borrowed from China Minsheng Bank. It is also indebted to government policy banks. Some four  billion Yuan has to be repaid to the Export-Import Bank of China, and  two billion is owed to China Development Bank (CDB).

A source close to the company said Rongsheng’s capital crunch had  worsened since February 2014, when the CDB demanded more collateral after the company failed to make a scheduled payment on a 710 million Yuan loan. When Rongsheng refused, the CDB called the loan. Other banks that issued loans to the shipbuilder have taken similar steps.

A few months after CDB’s move, the Jiangsu Province government intervened by renegotiating overdue loans and encouraging Rongsheng to reorganise its business. Provincial officials and representatives from the Rugao government tried to help in May 2014 by sponsoring a meeting between Rongsheng and state-owned China State Shipbuilding Corp. (CSSC) officials aimed at a possible bailout.


– This Day

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