News Center

Under the impact of the epidemic, the plight of China's ship repair industry

After bidding farewell to a busy and beautiful year in 2019, the steady momentum of the ship repair industry will continue. A sudden outbreak of new crown pneumonia completely disrupted the operation rhythm of the ship repair market. The Ship Repairing Branch of China Shipbuilding Industry Association believes that the current prospects for the performance of ship repair companies are worrying, and the industry's dilemma has emerged in the next three months, and we should make every effort to fully respond. With the continued efforts of all regions to resolutely win the fight against epidemic prevention and control, shipbuilding companies' increased confidence, objective analysis, and proactive response will definitely reduce the impact of the epidemic, get out of the predicament early, and achieve longer-term development.

Prospects for compliance under the epidemic are worrying

At the 71st meeting of the Chinese ship repair company "SPEC" held on January 10, ship repair companies expressed optimism about the industry situation this year. "With the number of completed ships being repaired reduced by nearly 8% year-on-year, the ship repair output value of SPCC member units was close to 22 billion yuan, an increase of 58% year-on-year, and achieved the best results in 10 years." In the overall profitability of the industry, one-third of the 45 major companies have a profit of more than 50 million yuan, and there are also large profit-making companies with a single plant profit of more than 500 million yuan. After the high-load operation of production and operation in 2019, the main ship repair companies at this time in May and June are basically full. In particular, the continuation of the desulfurization tower modification business has provided strong support for the prosperity of the ship repair market.

However, the menacing epidemic made the crisis in the ship repair industry suddenly apparent. A survey by the China Shipbuilding Association's Ship Repairing Branch shows that more than 200 ship repair projects at the SPCC's 15 major companies are in the grim situation where they cannot fully resume work after the Spring Festival. Of these on-board ships, 93.3% were from outer ships.

According to the analysis of the China Shipbuilding Association's Ship Repair Branch, the current attitude and position of foreign shipowners under the epidemic can be divided into three categories. The first is that 1.5% of the shipowners' requests for the "force majeure" clauses applicable to the contract in the outbreak are temporarily not accepted. The second is that 3% of shipowners are subject to charterers or shippers, expressing concern about how the epidemic situation affects ship repair performance. Third, 95.5% of shipowners expressed their understanding that the epidemic situation will affect compliance. Among them, 55% agreed to an appropriate extension; 43.5% only expressed their understanding without specific arrangements; and 1.5% had passed engineering changes to ensure compliance.

Industry dilemma has already emerged

The dilemma of the industry in the next three months has already emerged. Analysis by the China Shipbuilding Association's Ship Repair Branch. First, the Baltic Maritime Association (BIMCO) contract format, the Standard Contract of the China Maritime Arbitration Commission, and the industry's China Ship Repair Price Guidelines all include similar situations in the epidemic situation as "force majeure "Terms. However, laws such as the Maritime Law, the Civil Procedural Law, and other laws stipulate that ship repair companies have the obligation to “inform”. If this obligation is not fulfilled in a timely manner, it will adversely affect future rights protection.

Secondly, according to the agreement or practice of the “old customers” between shipowners and ship repair companies, some single ship repair contracts are usually signed at the time of completion and delivery. In other words, many of the over 200 outer-ship repair projects currently in the factory are in a state that they have not yet "contracted". Obviously, in the face of the facts that have been formed, sincere "old customers" will "see the truth when they are in trouble", and whether other "old customers" will give charcoal in snow is doubtful.

In addition, the impact of the epidemic on the ship repair industry may not be short-term. For ship repair companies, it is wise to plan for a longer time to deal with the impact of the epidemic. On the one hand, some ships at the factory are unable to fulfill the contract, and on the other hand, the subsequent ships are unwilling to be sent for repair, which may cause the labor, operating income and cash flow of the ship repairing enterprise to decrease and the cost to rise. Ship-repairing enterprises should be well prepared for the epidemic to hit the industry within three months.

Do your best to respond

In order to effectively respond to the impact of the epidemic, the China Shipbuilding Association's Ship Repair Branch recommends that, on the first day of resumption of work, the ship repair company should fulfill its obligation to notify and send a written notice of the "force majeure" of the epidemic to all shipowners. Regardless of whether the shipowners need documents from the Chinese authorities, they should arrange and prepare the supporting documents of the China Council for the Promotion of International Trade, the China Chamber of Commerce for Import and Export of Machinery and Electricity, and the local government on the epidemic situation. In particular, pay attention to the shipowners who have changed the second type of "worry" mentality.

At the same time, ship repair companies must improve the risk control system in a timely manner, attach great importance to the timely signing of contracts, and pay close attention to the force majeure clauses and disputed clauses of the contract, especially for those shipowners who have a first-class "non-acceptance" position. The biggest risk for ship repair companies is still the performance risk. Therefore, they must do everything possible to secure the nodes and try to find ways to fulfill the contract. This is the responsibility of ship repair companies to shipowners.

In addition, we should also pay attention to the national and local government's policies and measures to help enterprises overcome difficulties, and strive to alleviate the pressure of reducing labor, operating income and cash flow, and rising costs; through industry organizations, actively learn from the effective practices of brother companies; The company's own good operating and management foundation is going all out to seek opportunities to turn danger into disease prevention and control.