New policy to end that sinking feeling

Earlier this month, the State Council, China's cabinet, laid out a plan to improve and readjust the country's shipbuilding industry between 2013 and 2015, to reshape the industrial structure of this massive sector, urging governments in Liaoning, Jiangsu, Zhejiang and Guangdong provinces to stop approvals of new shipyards and upgrade the value chain to build high-end vessels.

"Many Chinese shipbuilders are now betting on vessels deemed to be higher in value, such as liquefied natural gas and liquefied petroleum gas carriers, as well as marine fishing vessels, offshore pipe-laying vessels, large icebreakers and chemical tankers," said Li Lei, an industry analyst with Shanxi Securities Co.

Li said many shipyards in Jiangsu and Zhejiang provinces hope this trend will help them tap into more international buyers and reach new markets.

The State Council said the Chinese shipbuilding industry should be able to maintain 25 percent of the global market share for high-end vessels and one-fifth for the global offshore engineering-product market by 2015.

As part of this plan, the government will offer incentives to ship owners who want to replace their aging ships by ordering new vessels. Voluntarily scrapping high-carbon-emission and old ships is also welcomed. The government currently is in the process of drafting a plan to decide how many years should pass before a vessel can be defined as an aging ship.

Cao Jianhai, a researcher at the institute of industrial economics with the Chinese Academy of Social Sciences in Beijing, said it is still too early to predict what impact this policy will bring to Chinese shipping companies.

"Large shipping companies such as China Cosco Holding Co Ltd and China Shipping Container Lines Co Ltd will for sure be keen on such an advantageous policy in reducing the market competition among medium and small shipping companies because the majority of their ocean vessels are relatively new and large," Cao said.

"On the other hand, medium and small Chinese shipping companies will not be keen to spend money on new ships because their financial situation is quite modest and many of them cannot afford to equip new vessels. The ships they have are all aging vessels with a service period of between 15 and 20 years."