Jiangsu Lianyungang closes shipyard JV

Jiangsu Lianyungang Port Co, China's leading port business operator, announced the dissolution of its shipyard joint venture, and a company official told the Global Times Wednesday that the decision was a result of difficulties confronting the sector.

"The venture has suffered losses due to the slowdown in international trade, which led to the decision to dissolve the company," Sha Xiaochun, the board secretary of the port company, told the Global Times.

The company, based in East China's Jiangsu Province, is mainly engaged in the loading and unloading of cargo, as well as warehouse management.

It established the COSCO (Lianyungang) Shipyard Co with COSCO Shipyard Group Co in early 2008, with a registered capital of 180 million yuan ($24.84 million).

Lianyungang took a 40 percent stake in the venture, with COSCO taking 60 percent.

The joint venture, which has more than 500 employees, saw initial success with its vessel repair and modification business, and reported a profit of 44.98 million yuan in 2008.

Although the company was impacted by the 2008 financial crisis, it was still able to post profits in 2009 and 2010.

However, last year it posted a loss of 80.98 million yuan, more than double the 2011 losses of 30.28 million yuan.

"Under the grim international trade conditions, many shipping companies would rather just get rid of their old vessels, instead of having them repaired," Liu Wei, an analyst at China Shipbuilding Economy Research Center, told the Global Times.

"This had a heavy impact on business for the company," said Liu, noting that the industry as a whole has suffered a lot in recent years.

State-owned China COSCO Holdings Co, operator of the world's largest bulk cargo fleet, saw its losses reach 9.6 billion yuan last year. It said in March that it was planning to sell its logistics unit to raise capital.

The company also risks seeing its shares being suspended from trading if it records a loss for a third straight year in 2013.

China's foreign trade grew by 6.2 percent year-on-year in 2012, well below the target of 10 percent. For this year, policymakers have set a growth target of 8 percent.

"But the overseas economies have their own issues to handle. I don't think the shipping industry will recover any time soon, as international trade is still under pressure," said Liu.

A shipbuilding businessman based in East China's Zhejiang Province, who wished to remain anonymous, told the Global Times that his company is sometimes anxious about accepting orders, given the scale of investment required to build ships.

"If a buyer defaults, which is quite common nowadays owing to the bleak foreign trade situation, the losses are all mine, as the down payment covers a very small proportion of the total investment for building a ship," he said.