Two wholly state-owned Chinese shipbuilders formally integrated into a single shipbuilding giant on November 26, a union seen as helping to improve industry concentration, expand the enterprise’s scale and enhance its competitiveness. However, industry watchers canvassed by Mysteel Global on November 29 cautioned that any positive influence from the merger will not show itself in the market in the short run.
The two giants, both 100% owned by State-owned Assets Supervision and Administration Commission (SASAC) of the State Council, are China Shipbuilding Industry Corporation (CSIC), headquartered in Beijing, and China State Shipbuilding Corporation (CSSC) in Shanghai. The new shipbuilding conglomerate continues to use CSSC as its company name, Mysteel Global noted.
After the merger, CSSC became the world’s largest shipbuilding group with total assets valued Yuan 790 billion ($112.3 billion). It has 147 members including scientific research institutions, enterprises and listed-arms, with 310,000 employees, Mysteel Global learned from the company’s official news release on November 26.
“The establishment of CSSC is in response to China’s pressing need to promote the development of defence science and technology. Besides, the move, as part of the country’s efforts in reforming state-owned assets and enterprises, will also improve our competitiveness in the global shipbuilding industry,” Hao Peng, the secretary and director of SASAC, said in the establishment ceremony on November 26.
A Beijing-based official with a shipbuilding company said the integration is mainly a response to the central authorities’ guidelines. “The combining of large-sized state-owned enterprises could effectively improve industrial concentration and avoid vicious competition at home,” he told Mysteel Global, adding that it will also enhance the firm’s international competitiveness.
Another Shanghai-based industrial analyst agreed. “Privately-owned shipbuilders such as Yangzijiang Shipbuilding Group Co (in East China’s Jiangsu province) are more skilled in controlling costs, and the merger will not only help expand scale but also help simplify cost control,” she stated, adding that some of the two companies’ businesses overlap.
She also believed that the marriage between the two giants would further sharpen the production technology and improve China’s status in the global shipbuilding industry, but it will need some time. “The healthy development of China’s shipbuilding industry will definitely drive demand for steel plate and specialty steel too, but in the near term, steel procurement is unlikely to witness any significant changes,” she added.
Chinese shipbuilders received fewer new vessel orders over January-October, with the ten-month total reaching 21.2 million dead weight tonnes, down 25.6% on year, according to the latest statistics from China Association of the National Shipbuilding Industry.
This article has been published under an article exchange agreement between Mysteel Global & SteelMint.
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