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China shipbuilder a casualty from national steel fallout

Yangzijiang Shipbuilding Holdings Ltd is the first to suffer the aftermaths of China’s steel shortage

In Q2 2021, China suffered an acute steel shortage due to the republic’s strict carbon emission reduction policy. The known casualties were the construction conglomerates which were either neck-deep in debts and hoping for a bailout, or possibly on their way to liquidation.

Real picture of China’s steel meltdown
China’s Global Times reported in late May 2021 that casualty countries from the steel shortage included South Korea and Vietnam. It quoted some reports which revealed 59 construction projects were suspended due to steel shortage, accompanied with 50 per cent price hikes.

All eyes then were on how would builders — especially Evergrande — emerge from the sector’s meltdown. A surprising twist developed: Yangzijiang Shipbuilding Holdings Ltd’s shares fell 6.4 per cent to S$1.31 on 2 November 2021 after reporting a 21 per cent slump in Q3’s gross profit. The company is China’s largest shipbuilder and listed in Singapore Stock Exchange.

MarketWatch quoted Yangzijiang Shipbuilding’s announcement on 1 November 2021 regarding its gross profit decline to RMB 1 billion (US$156.3 million) for Q3 2021. Despite a 25 per cent increase in revenue to RMB 4.47 billion (US$698.5 million), its gross profit margin narrowed by 13 percentage points to 22.4 per cent owing to rising raw material costs. The company remarked its major shipyards are currently operating at full utilisation rates, and there were no changes to its scheduled delivery of vessels in H2 2021.

The mammoth shipbuilder added that as part of a strategic review of its debt investment portfolio to allow it to focus on its core shipbuilding business, it continues to consider various possibilities and their respective tax implications. This reflects on the scale of China’s steel crisis, which impacted a private shipbuilder. The next question would be: how would the state-owned builders fare during this challenging time?


Marine Online News Team
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