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Yangfan Shipbuilding on edge as financial troubles heighten

Yangfan Shipbuilding on edge as financial troubles heighten
Despite a recent attempt made with the local government to help it overcome cash flow problems, Yangfan Shipbuilding Group’s financial condition seems to be getting worse.

Messages between brokers seen by Splash report alarming information such as: “Zhoushan Yangfan Shipyard is in finance problem. D’Amico of Italy has cancelled four 64,000 dwt bulk carriers already (two sold by yard for collecting cash back). Further Yangfan has no money to purchase engines, steel plate which make all project delayed. This yard will be bankrupt soon. The sister yard Qingdao Yangfan has been bankrupt already”.

Indeed this week several brokers report that another ultramax bulk carrier newbuilding has been sold by the shipyard to the Denmark-based Celsius Shipping for a price ranging between $16-17m.

D’Amico has confirmed it has had problems with Yangfan. The company issued a statement to Splash, saying: “d’Amico has cancelled the first two newbuildings in the series in accordance with its rights under the respective shipbuilding contracts, after rejecting the vessels for non-compliance with the terms of the contract and specification due to a design issue.”

An official at Yangfan confirmed to Splash that “the shipyard is facing financial difficulties and the company is still working on solutions” but he declined to comment when being asked if the yard will go bankrupt.

One of the main clients of this Chinese shipyard is another Italian shipping company, Grimaldi Group, which ordered last year originally five and then exercised options for a further two car carriers worth $60m each and set for delivery from 2017 onwards. These vessels are tailor made for sea transport from Europe to America of new cars produced by Fiat Chrysler Automobiles.

Emanuele Grimaldi, ceo of the Naples-based shipping group, seems not to be particularly worried about the financial troubles of Yangfan: “We are constantly looking at the situation but we are not worried about that since we have refund guarantees with first-class banks for the orders signed with Yangfan and furthermore another three pure car truck carriers will be delivered in advance by Jinling shipyard”.

Grimaldi also added: “I don’t think that the government in China will leave a company like Yangfan to go bankrupt with a portfolio made of ten ships and other units on order. In the shipbuilding contract we signed last year there are penalties of €20,000 for every day of delay in delivering our new ships and in the meantime we will go on taking vessels on long time charter benefiting from the current low market.”

On Beijing’s so-called white list, which makes it easier to seek capital, Yangfan has two drydocks with an annual capacity of 1.5m dwt. The company came into being in 2010, though it can trace its history as Qingdao Shipyard back to 1949.

Earlier this month, the Chinese government announced plans to make it harder to be on the white list. The list has been the Chinese government’s way of cutting back on shipbuilding capacity. At its peak, China had more than 3,000 yards six years ago.

A report from DNB Markets in Oslo this April predicted “a perfect storm is brewing for Chinese yards, likely to be followed by a sharp decline in newbuilding prices, capacity shutdown, and a potential new shipping supercycle at the end of the decade”.

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