Jiangsu Shipbuilding Industry Faces Exchange Rate Risk

Our province is the largest province in the domestic shipbuilding industry. The continuous appreciation of the renminbi has made Jiangsu's shipbuilding companies directly face uncertainties. According to the Agricultural Bank of China Taizhou Branch, at present, China's shipbuilding companies have signed contract orders of more than 70 billion U.S. dollars, but due to the RMB exchange rate reform, the appreciation of the U.S. dollar has exceeded nearly 16%, and there is room for further appreciation. The shipyard faces certain exchange rate risks. The profitability is inevitably affected.

For domestic shipping companies, the effectiveness of foreign exchange risk management has a direct impact on their production and operations. In an interview, the vice president of a shipbuilding company lamented: “From the fact of dealing with changes in the exchange rate, the game of entering international competition is becoming more and more true and companies are becoming more and more mature.” Shortening the docking period

“Macro-control has little effect on our shipbuilding companies, but the appreciation of the renminbi, the rise in steel prices, and the increase in labor costs have a great impact on us.” Yuan Kaifei, chairman of Jiangsu New Century Shipbuilding Company, admitted frankly.

Under such circumstances, some shipbuilding enterprises have started to increase production efficiency and shorten the period for ships to be docked.

According to reports, the new century shipbuilding has increased the steel utilization rate from 85% to 89%, and the next step will increase to 92%. According to Chen Shaohong, Minister of Shipbuilding Finance of the New Century, Shipbuilding of the New Century plans to deliver 14 ships last year, and actually deliver 18 ships. On the same equipment basis, the production of 4 more ships brings nearly 200 million U.S. dollars in sales revenue.

A person in charge of Taizhou Sanfu Shipbuilding Engineering Co., Ltd. said that a certain series of ships in a general shipyard tends to produce a lot of articles. The first time is slightly longer, and the speed behind it is accelerated. "We built a series of ships, the first may be a little longer, the first system boat (manufacturing time) is about 14 to 16 months, then slowly reduced to about 12 months."

Although production efficiency has been improving, some companies and bankers also believe that there is still a large gap in the production efficiency of Chinese shipbuilding companies compared with Japanese and South Korean shipyards. According to a banker's briefing, taking a shipbuilding 500,000 dwt as an example, Chinese companies use 3,000 to 5,000 people, while Japanese and Korean companies may use hundreds of people.

“Because labor costs have advantages, China's shipbuilding companies have gained opportunities for development. If we started with them (labor costs) and we didn't have as much technology and management as them, we wouldn’t be able to compete.” Yuan Kaifei said frankly. Increase your down payment

The construction contracts signed between shipbuilding companies and foreign shipowners are mostly denominated in US dollars, and they are closed contracts. The hedge space is small, the contract amount is large, and the time span is long. The continuous appreciation of the renminbi continuously reduces the sales revenue of export-oriented manufacturing companies and directly affects the profits of enterprises.

Since shipbuilding can take 3-4 years from contract signing to design, construction, launching, and delivery, and the contract payment is paid in several installments, this means that the remaining amount of the contract is subject to great exchange rate risk.

According to a written document provided by Shipbuilding in the new century, at present, there are 119 effective ship orders for shipbuilding in the new century, and production tasks have been scheduled for 2011, and there are still more than 10 marine engineering vessels under negotiation.

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