Seoul: A Korean analyst for J P Morgan has suggested that the weakening yen puts Chinese shipyards at even greater threat of extinction. Lee Sok-Je noted: “The Japanese yen depreciated to a 20-year low against the renminbi in the currency markets. As Chinese yards have a similar product mix as the Japanese yards, largely relying on bulk carriers, the yen depreciation (68% for the past 4 years) will likely emerge as the biggest threat, in our view.”
Lee added that since Chinese bulk carriers are traded at a 20% to 30% discount in the second-hand vessel market, the vessels will be regarded as more expensive compared to Japanese bulk carriers, despite the 10% gap in the newbuilding markets.
Lee reckoned Chinese yards will have to cut their building costs by another 10% or more to maintain any competitiveness in the newbuilding market.
Japanese and Chinese yards’ order backlog is similar in that more than 50% of both nations’ shipbuilding receipts is dry bulk related.
According to a report at the end of April on Splash the other factor making Japanese yards competitive again is the cheap financing on offer from Tokyo.