Compiled by Caijing staff

(Caijing.com.cn) China's shipbuilding facilities are expected to have idle capacity of more than 20 million deadweight tons, or one third of the total, after 2011 as new shipyards commence operations amid a severe demand slump, the China Association of National Shipbuilding Industry (CANSI) said.

Citing the London-based shipbroker Clarkson Plc., the association said in a statement on July 1 that new shipbuilding orders worldwide totaled 1.6 million DWTs in the first five months, down 98 percent from a year earlier. 

China's total shipbuilding capacity has reached 60 million DWTs, while monthly new orders have been lower than output over the last eight months, the CANSI said.

Order cancellations and contract renegotiations are also increasing.

The association said that incomplete statistics show that nearly one million DWT in new vessels have been built but cannot be delivered as scheduled due to customers' financial problems.

The same data also show that from October 2008 to May, orders of 152 vessels, or 4.4 million DWTs, were canceled, accounting for 2.3 percent of total orders the country's shipbuilders held at the end of May, according to the CANSI. 

It added that the real cancellation rate could be as high as up to 5 percent if all the nation's shipbuilders are surveyed.

The association predicted that in the second half of 2009, the impact of lower prices for used vessels will continue to be felt by the new-vessel market, and that the bearishness facing the shipbuilding industry is not expected to turn around soon.

CANSI urged shipbuilders to review existing orders they held to prepare for any possible disputes with buyers.

Ministry of Industry and Information Technology figures show that in the first five months of the year, major shipbuilders' combined revenue rose 45.8 percent year-on-year to 159.96 billion yuan, with profits down 2.7 percent at 12.1 billion.

Total shipbuilding output grew 61 percent year-on-year to 12.2 million DWTs in the first five months, with new orders plunging 96 percent to 1.2 million DWTs.

Customer orders for at least 55 new vessels with combined capacity of 2.3 million DWTs were cancelled over the January to May period.

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