China's Young, Burly Shipyards Sinking Fast

(Beijing)–There's plenty of water but the gold is disappearing along a strip of the Yangtze River that China's shipbuilders call the "golden waterway."

A dramatic slowdown for the industry has reversed the fortunes of companies such as Jiangsu Jiuzhou Shipyard Co. Ltd., one of many yards that sprang up during a short-lived bull market for big ships such as oil tankers and container carriers.

"We haven't received a new order in 2012, and we had only four orders for ships last year," company Chairman Chen Junfu told Caixin.

Indeed, as of April only two oil tankers were being built at the 20-hectare shipyard that opened in 2007. Nearby, some golden waterway shipyards have already gone bankrupt.

The slump that began last year is also hurting companies in a shipbuilding hub called the "silver triangle," which spans a section of the Yangtze that includes the city of Nanjing.

Industry watchers say bankruptcies, shutdowns and consolidations are expected to spread in coming months.

The China Shipbuilding Industry Association said new orders fell 40 percent nationwide in January and February from the same period last year. Sixteen key companies monitored by the association lost money, and 37 saw their profits decline.

Essence Securities said eight of China's 10 largest shipyards received no new orders between January and April. The exceptions were Shanghai Waigaoqiao Shipping Co. and Guangzhou Shipyard International Co.

Business through 2012 will be more difficult than last year, and conditions will worsen at least until 2014, said Lu Xiaoyan, vice president of China State Shipbuilding Corp., who spoke recently at the company's annual meeting.

An official with the Jiangsu provincial government echoed that warning. "A wave of closures in the shipbuilding industry has yet to begin," he said, "and a hurricane is approaching."