Taiwan bid to join shipbuilding titans stalls in recession-calmed seas
Kaohsiung, Taiwan — In one corner of this bustling southern port, half-dismantled ships shudder and groan as cranes wrench away huge chunks of steel.
Along the bay, meanwhile, new vessels slip out of berths at the massive China Shipbuilding yard.
The Republic of China (ROC) is the world's largest dismantler of ships. It would also like to gain a reputation as the builder of new ones. But both ends of the business have their problems.
There are 36 ship-breaking wharves in Kaohsiung, and most are currently occupied. The world's shipowners - pinched by a decline in world trade, especially in oil - are selling off old ships at bargain-basement prices.
The Taiwan Old Ship Demolition Industry Association, comprising some 60 firms , reckons about 85 workers can tear a supertanker into neat piles of steel plate and old scrap in little more than a month.
Last year ship prices were high, and steel scrap prices low, creating a serious slump in the dismantling trade worldwide. This year things have improved somewhat, and the Taiwan industry association is predicting purchase of 2.9 million light displacement tons (a measurement of ship weight that includes only permanent equipment, usually only a fraction of the total quoted tonnage). This would equal the record years of 1978 and 1979, and top last year's 1.8 million figure.
Nonetheless, the dismantlers face difficulties. They normally borrow money at high interest rates to buy ships, and profits hinge on quick resale of the scrap. Prices for the metal at home and abroad are depressed. Yet there is no shortage of vessels to take apart, given the current slowdown in world trade.
If the slump is bringing more vessels in for junking, however, it certainly isn't helping the number of new ones slipping out of berths at China Shipbuilding. At present, yards at both Kaohsiung and Keelung are full. But the current backlog of orders is expected to dwindle by late next year, and concern abounds.
''Generally speaking, the shipbuilding business is bad, even for the Japanese and Koreans, because the world shipping trade is bad,'' says Philip Chen, sales department manager for China Shipbuilding.
''Right now, we have orders for 16 ships at Kaohsiung and eight at Keelung. These include four sophisticated tankers for Exxon and six specialized product carriers for Kuwait - the first time we have tried to build this type of ship. So now, it's very good.
''But what happens at the end of 1983 or early 1984? We've been looking hard for new orders, and have had many inquiries . . . but so far no firm commitments. It's very difficult because the competition is really severe.''
Taiwan is no newcomer to shipbuilding. It had a yard at Keelung, the northernmost port, under Japanese occupation. But it is only since the yard at Kaohsiung, with annual capacity of 1.5 million tons, was opened in the mid-1970s that the country has had any thought of competing against the shipbuilding titans of Japan and South Korean.
China Shipbuilding has being trying to trim costs to survive, even though it is now making virtually no profit. Most damaging to the corporation, says Mr. Chen, is its inability to match the generous credit offers of the Japanese and Koreans.
''We have to get the money from the banks, and the interest rates are killing us,'' says Mr. Chen. ''Most shipowners these days don't have the cash - Exxon and Kuwait are rare exceptions to this rule - and when we tell them we can't offer credit they lose interest and go elsewhere.''
Shipbuilders have been unsuccessful in trying to garner government aid. One problem is that the Export-Import Bank has limited funds. But the main reason, points out T. Wu, vice-minister for economic affairs, is that government regulations preclude such help. ''The low-interest loans we provide are designed to help local owners who fly the ROC flag, not to assist China Shipbuilding. Maybe if there was some big improvement in management there, we could be a bit more sympathetic.''
The company argues it's making the best of tough times. ''We have very modern facilities and one of the biggest shipyards in the world. . . . It's a shame we can't get more business,'' Chen says.