Greater ChinaShipyards

CSSC and CSIC merger speculation grows

Eighteen years after they were split apart – with the Yangtze River serving as the demarcation line – China’s top two shipbuilding groups are hotly tipped to come back together again.

Merger speculation between the two Chinese state-run shipbuilding conglomerates, China State Shipbuilding Corporation (CSSC) and China Shipbuilding Industry Corporation (CSIC), has resurfaced today following CSSC, the southern shipbuilding group, and its subsidiary, CSSC Offshore & Marine Engineering, both suspending stock trading.

CSSC said the trading halt was due to planning of a major issue, which may involve a restructuring.

CSIC, CSSC’s northern counterpart, has suspended its stock trading since the end of May for a major restructuring deal. In September, the group signed agreements involving investment and debt-to-share swap plans, with eight institutional investors to sell part of its sakes in two fully owned yards – Dalian Shipbuilding Industry (DSIC) and Wuchang Shipbuilding Industry (WSIC).

An analyst at Sinolink Securities told Splash that the merger between CSSC and CSIC is going to happen sooner or later and he believes that CSIC’s recent move to dilute its shares in two major yards is in order to lower its debt ratio in preparation for the potential merger.

In a government meeting in August, Chinese premier Li Keqiang called to lower the leverage ratio at state-owned enterprises and accelerate the consolidation in several sectors including shipbuilding.

According to a source dealing with both CSSC and CSIC, the two groups have all been making efforts to streamline their operations through internal integrations, which could be a sign of the merger.

Spokespersons at both CSSC and CSIC declined to comment when contacted by Splash.

The potential merger follows a new round of state-owned enterprise mergers in the past year including the merger between Baosteel and Wuhan Iron and Steel in 2016, and two major power groups Shenhua Group and Guodian Group in August this year. In 2015, China’s top two state-run shipping lines – Cosco and China Shipping – also merged.

CSSC and CSIC were spun off from the same group company by the central government in 1999. Combined as a single entity the group would be by quite some distance the world’s largest shipbuilding conglomerate.

Commenting on today’s merger speculation, Martin Rowe, managing director at Clarksons Platou Asia Hong Kong, told Splash that the consequences might actually be minimal.

“In terms of the day to day effect on the shipbuilding market I would think it is unlikely to have a profound practical consequence,” Rowe said, explaining: “Whilst nominally CSIC and CSSC have been competitors until now there has been remarkably little difference in pricing and they produce similar designs and types of vessel. Consolidation of Chinese shipbuilding capacity could well make economic sense but, if mergers in other sectors are anything to go by the efficiency gains are not that easy to spot – ie no layoffs , no reduction in management capacity, etc.”

Jason Jiang

Jason is one of the most prolific writers on the diverse China shipping & logistics industry and his access to the major maritime players with business in China has proved an invaluable source of exclusives. Having been working at Asia Shipping Media since inception, Jason is the chief correspondent of Splash and associate editor of Maritime CEO magazine. Previously he had written for a host of titles including Supply Chain Asia, Cargo Facts and Air Cargo Week.
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