A TOP official of one of the world’s leading Chinese shipping firms said this is not a good time to build another shipyard as there is more supply than demand for ships globally.
Executive Vice President Zenggang Yu of China Ocean Shipping Corp. Ltd. (Cosco) said they also have no intention of taking over the country’s largest shipyard, operated by bankrupt Hanjin Heavy Industries and Construction Philippines (HHIC-Phil).
“We think that shipbuilding’s capacity is more supply than demand at the moment even in the world. So it’s not a good time to build a shipyard or build larger than the shipbuilding’s capacity,” Yu told the BusinessMirror on the sidelines of the Boao Forum held for the first time in Manila.
Yu added that there are already a lot of shipyards in China, so they are not currently considering enlarging their shipbuilding capacity in two or three years’ time.
“Even [from] Cosco shipping’s point of view, we already have a lot of capacity for shipbuilding in China, and it is also the capacity over the demand, so [there] is no reason to enlarge the capacity of shipbuildings, no reason. Only reduce, I think. We have to reduce the capacity,” Yu added.
Asked when demand for ships would improve, Yu said: “That would only depend on trade: the more trade, the more cargo flows, the more ships, then they need more ships.”
Political issue
FRANCIS CHUA, honorary president of the Federation of Filipino-Chinese Chambers of Commerce and Industry Inc., also said Chinese firms are not keen on taking over Hanjin shipyard.
“It’s more of a political issue because the ambassador of China has already spoken [that] if we are going to enter Philippines, we would put up a brand-new shipyard because if we take over the Hanjin, there would be a political backlash, they would say na ‘itong China, inaagaw niya lahat ng Pilipinas[this China is grabbing everything in the Philippines], so that’s the reason,” Chua said.
Three foreign investors are in the advanced stages of acquiring the Hanjin shipyard, and no Chinese firm is on the list, according to Trade Undersecretary Ceferino S. Rodolfo.
None of the prospective white knights come from China, in spite of the government’s earlier statement that two Chinese firms are looking to bail Hanjin out of its financial mess.
Those who vowed to come up with studies and a business proposal in a shot to take over Hanjin’s facilities in Subic Bay include Dutch Damen Group, French Naval Group and a consortium of American firms.
HHIC-Phil in January filed for corporate rehabilitation, after struggling to pay $412 million in loans to five domestic banks. Investment officials are searching far and wide to try and save the shipyard that once employed over 30,000 workers.
Security experts, including former Navy Chief Alexander P. Pama, earlier warned the government it will compromise national security should it allow China to take over the shipbuilder’s facilities in Subic Bay. The shipyard sits at a strategic area near West Philippine Sea, where Beijing has been building up military presence and harassing Filipino fishermen.
In spite of the financial trouble HHIC-Phil got into, the trade official said the government is determined to keep shipbuilding as a priority investment area. However, changes must be introduced into the kind of shipyard that will be allowed, as some types are no longer doing business.
Since taking over the Subic Bay shipyard in 2006, South Korea’s Hanjin invested over $2.3 billion and delivered 123 cargo ships by the end of 2018. The firm that will take over the facilities must have a working capital of $12 million monthly to shoulder all of HHIC-Phil’s debts.
With an earlier report by Elijah Felice E. Rosales
Image credits: Roy Domingo