Chinese shipbuilders plan IPOs

Chinese shipbuilders are now a major world force. This is because they have the world’s major market in the place where they work. And, at the same time, intitial public offerings, IPOs, have become favorite ways to financing expansion and letting the originators get their hands on some of the loot. Thus it comes as no surprise at least seven Chinese shipbuilders are planning share offerings, IPOs.

In a sense this underlines China’s efforts to build up its domestic fleet but it also shows it wants to branch out into the construction of more advanced vessels.

Probably the largest of the anticipated initial public offerings is likely to come from state-owned China Shipbuilding Industry Corporation (CSIC). (You can asked the question as to whether a state-owned company that has an IPO remains under state control. It is an interesting question and you can see such a battle for power being fought out in Australia where the national telecom compay, Telstra, has gone public and is acting in ways in which the government is not comfortable, not comfortabke at at.

CSIC wants to raise about $900 million on the Chinese mainland A-share market. The other major state-owned shipbuilder, China State Shipbuilding Corporation (CSSC), is considering a share sale in Hong Kong.

Meanwhile, five privately owned shipbuilders – Jiangsu Rongsheng Heavy Industries, Sinopacific, Mingde Nantong, Yantai Raffles Shipbuilding and JES International – are apparently also looking to sell equity in order to fund their expansion. This is confirmed by Sinopacific and Mingde although no details ae offered.

In a sense these IPOs cannot lose.

The Baltic Dry Index, a key measure of commodity shipping costs, has more than doubled in the past year.

Gilbert Feng, assistant director of the Hong Kong Shipowners’ Association, who visited China’s two major state-owned shipbuilders, said: ‘New building orders are already full until 2010, so their executives certainly sound very confident.’
China recently overtook Korea, the world’s leading shipbuilding nation, for the first time in terms of one specific measure – first-half ship orders in terms of deadweight tonnage. CSSC’s goal is to double its shipbuilding output over the five years to 2010.