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@sea international - July 2012
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Highlights > Shipowners should watch China’s property market
Whither China ? The economic train has been experiencing jolts along the track, but is still thundering along. At the officially reduced growth rate of 7.5%, performance looks to be more sustainable and stronger than that of any other major nation. For analysts, a key to getting on top of the trends is to follow what is happening to the housing market in that mighty country of 1.3m-plus people.
About 40% of steel products in China go into civil construction. “So when you look at the shipping market, do keep an eye on the property market,” one Chinese executive advised recently. Some heat has been drawn from that property scene, and stockpiles of iron ore at one of the main import ports, Qingdao, recently soared to a total of 15m tonnes as steel mills slowed down their production, partly in the hope of slashing further the commodity price of the ore. Some small mills even suspended production, with importers defaulting on contracts.
This does not seem to be a cause for more than short-term woe. Of the 1.5bn tonnes of steel produced every year in the world, China accounts for nearly half. Reflecting on the drastic changes of recent years, the Chinese businessman said : “We used to export raw materials. Now we import raw materials. We do need raw materials.” Apart from that, currently high on the import list are high-tech products, tools, instruments, machinery and luxury-branded goods.
The central authorities are confident enough in their policy-making to resist some of the slowdown pressures, notably in shipbuilding despite the fact that in the last few months several order-starved yards have been pushed into bankruptcy.
Shipbuilding, in which China is world leader, is one of the industries that the government in Beijing is, under its five-year plan, seeking to encourage, because of its social value in providing jobs. Despite the overcapacity that is plaguing Chinese and global shipbuilders alike, the maritime industries are playing their part in supplying employment to workers migrating from poorer parts of the populous country.
The number of shipbuilders in the Asian nation rose to 1,500 in the boom, but over the last two years orders have dried up at many of them. The remedy is seen as concentrating 70% of the country’s shipbuilding capacity by 2015 into the 10 largest shipbuilders. To counteract weakness elsewhere in the global economy, there is likely to be much more emphasis on domestic orders. This will call for a careful rebalancing of the order book : more than 80% of shipbuilding contracts in China in 2011 were for export.