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We suggest strong shipping companies should purchase foreign companies, and take that technology, brand or marketing service network to be used back home
Shipowners’ champion Want to know where Chinese shipping is headed? Zhang Shouguo, general secretary of the China Shipowners’ Association, provides insights
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he role of a shipowners’ association is, unsurprisingly, to reflect and champion the interests of its members. For Zhang Shouguo, general secretary of the China Shipowners’ Association, this is no small task, given the rapid rise in both size and global recognition of Chinese owners in the past five years and the current malaise hitting most of his membership. A decade ago the CSA was a low profile organization, these days its statements are reported across the world, as befits
NEED TO KNOW NEED TO KNOW
CSA FOUNDED IN 1993, the China Shipowners’ Association (CSA) is composed of owners, operators and managers registered in the People’s Republic of China. Currently it has 208 members operating a fleet of more than 60m dwt, which accounts for about 80% of the country’s total carrying capacity.
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China’s maritime rise. For instance, no other body has weighed on so heavily against Brazilian miner Vale’s move to become a shipowner. At present, CSA has much to do to shield its membership from the worst financial period since the organisation was formed close to 20 years ago. The nine biggest Chinese shipping enterprises reported an aggregate loss of nearly RMB8bn in the first half of the year, according to a report by the Securities Daily. “The Chinese shipping industry is facing an extremely severe test,” admits Zhang. “Even the well-known big names in the Chinese shipping industry are all in the red. Many smaller sized companies’ ships have nothing to do at the moment.” The five-star flagged fleet ranks number nine in size in the world and Chinese ships carry just over one fifth of all the nation’s imports and exports, according to CSA. However, when it comes to equipment, operational management and fleet structures Zhang concedes the Chinese have a long way to catch up with more developed nations. How then to get out of the red inkstained mess that Chinese shipping finds itself in? Zhang urges local shipowners to
develop more rationally. “They should not build ships blindly,” he says. Also, shipping is essentially a game of survival of the fittest, Zhang reckons, and banks should distance themselves from those shipowners who are clearly in dire financial straits. Older ships, especially those that use more fuel and emit more pollution, need to be scrapped in greater numbers as soon as possible, he says, noting that currently China is the country with the highest number of old ships in the world. In terms of financing Zhang suggests his members take advantage of the ship industry fund and the various financial leasing platforms. Leaseback deals remain relatively untapped and could be important going forward. “They can be very useful to make an inventory of the company’s fixed assets and improve the utilization of the funds,” Zhang says. Zhang is also keen for government to step in and provide a series of policies and measures to promote sustainable development and improve local owners’ international competiveness. Government should also “explore” shipping tax reforms, Zhang says, by looking at how other countries have tackled this levy conundrum. Zhang applauds the government’s keenness to see mergers and acquisitions within the local shipping community, something that has been promoted since 2008. Likewise, the rise of pools in Chinese shipping is something to be encouraged, he says. Now, though, is the time for overseas acquisitions to help local expertise grow, argues the CSA boss. “We suggest strong shipping companies should purchase foreign companies, and take that technology, brand or marketing service network to be used back home and then they can also find suitable targets in China for acquisition,” Zhang recommends. Watch this space: what CSA recommends often becomes reality.