Good link.While this news could be good for the ship builders it is certainly going to "hit" the shipping companies GE SHipping/Shipping corp. of India.

I would back an IIT/IIM with my last penny!

Sitting on a combined order book valued at over $3,700 million, the ten shipyards in the country, including the State-owned facilities, are today literally struggling to keep pace with the flow of orders, both from the domestic as well as overseas markets. At the current pace of growth, it is expected that the domestic shipbuilding sector is well on its course to becoming a $20-billion industry by 2020.

This is in tune with the global order book position, which has more than doubled since 2002. For a long time hovering under the 100 million DWT mark till 2000, the global order book surged to 220 million DWT in 2006.

The growth in the shipbuilding space is also attracting financers and private equity investors, as is evident from the fact that ICICI Ventures recently made significant investments in Chennai-based Tebma shipyard, which is India's only shipyard to build offshore supply vessels. This will help the shipyards go in for significant expansions.

Says Mr Ramesh Singhal, Director of I-Maritime Consultancy: "With the current order books running full, there is a danger of over-capacity, in case the global shipbuilding industry slows down. Currently, Indian shipyards import machinery components and assemble them in India. It is expected that with increase in shipbuilding volume, global manufacturers would setup ancillary units locally and Indian shipyards would export ships as well as its components."

Export lead

Private-sector shipyards ABG, Pipavav and Bharathi Shipyards are at present leading the list, with an order book of $844 million, $740 million and $590 million respectively. State-run yards like Cochin Shipyard and Hindustan Shipyard are having orders worth $362 million and $314 million respectively. Interestingly, out of the total of 223 ships on order from the Indian yards, 152 ships (value $2,778 million) are overseas orders.

An analysis of the order books of the shipyards would reveal that private shipyards are mostly banking on export orders — out of their total orders share of $2,686 million, export orders account for almost $2,284 million. In the case of PSU shipyards, it is the other way around, with domestic orders accounting for $517 million out of their total share of $1,011 million.

The industry order book has mirrored a CAGR of 60 per cent in the last five years, with expectations being that it could notch up a CAGR of 30 per cent over the next decade.

A report by I-Maritime predicts that the shipbuilding industry will consolidate itself to get into building large cargo vessels, including container vessels and tankers, during the next five years and VLCCs, gas carriers, drill ships and semi-submersibles between 2012 and 17.

http://www.financeasia.com/article.aspx?CIaNID=48774 - - Singapore

Yangzijiang Shipbuilding, which is currently on the road to drum up interest for its Singapore initial public offering, has set the price range at S$0.70 to S$0.95 for a total deal size of up to S$943.4 million ($622 million).

Even at the bottom end of the range, this will be the second largest Singapore IPO in the past five years after Thai Beverage’s $866 million offering in May last year, and the third largest ever if one includes SingTel’s $1.5 billion listing in 1993. Some bankers argue that this deal is no longer a suitable benchmark, however, given it happened more than 13 years ago.

The indicative range values the Chinese shipbuilder at 11.3 to 15.3 times its estimated 2008 earnings, which equals a sizeable premium to its South Korean rivals, which are currently trading at an average of 8 to 9 times, but at a discount to its Chinese comps that trade at an average P/E ratio of 18 to 20 times.

Because of their lower overheads and labour costs, the Chinese shipbuilders are generally seen to deserve a premium, but the question investors will be asking themselves is - how much of a premium? Guangzhou Shipyard International, which is listed in both Hong Kong and Shanghai trades at a 2008 earnings multiple of about 26 times in Hong Kong after it doubled its profit last year amid strong demand for new ships.

Jiangsu-based Yangzijiang is also benefitting from this demand and as of the end of last year, the company had a visible order backlog of approximately $2.8 billion for vessels that are due to be delivered between 2007 and 2010. Since then, it has received new orders with an aggregate value of $229 million for four container ships and four mini bulk carriers, which it expects to deliver in 2009 and 2010.

In 2006, the company’s net profit rose 60% to Rmb454.3 million ($58.2 million) on the back of a 52% rise in revenues to Rmb2.32 billion ($298 million).

“Shipyards and other infrastructure developments in China are the flavour of the month and this is a supply/demand story that is benefitting from the fact that there aren’t enough ships around,” says one observer

A key part of the company’s growth strategy is to build ships at increasingly larger sizes, including containerships with load carrying capacities of 6,000 twenty-foot equivalent units (TEU) and above, Panamax and Aframax chemical tankers and bulk carriers of 100,000 deadweights tonnes (DWT) and above. “We believe there is greater demand for these larger vessels and that they will provide us with better profit margins than smaller vessels,” the company says.

The company currently has orders for 12 containerships of 4,250 TEU in size and ten bulk carriers of 92,500 DWT each.

To achieve this target, Yangzijiang, which is already the leading privately-owned containership builder in China, is currently constructing a new shipyard through a majority-owned subsidiary that is expected to be completed in October 2007. Once finished, the company will move all its shipbuilding operations for containerships above 2,500 TEU and bulk vessels above 55,000 DWT to the new yard, leaving the building of smaller ships at the existing yard.

The company will also expand into the manufacturing of offshore vessels and oil tankers as it believes there will be increased demand for these due to the increased investment by major players in the offshore oil and gas industry. Offshore vessels are used for transportation and delivery of drilling supplies, fuel, food and water to offshore drilling rigs and fixed or floating platforms. They can also provide processing of oil and gas.

The company is aiming to sell 993 million shares, or 30% of its issued share capital, through the IPO that is arranged by UBS as the sole bookrunner. DBS is a joint lead manager and also the lead manager for the domestic portion of the sale.

Two thirds of the shares are new, while the remaining third will be sold by executive chairman Ren Yuanlin, who is also the founder of the group. There is a 15% greenshoe, which could boost the total proceeds to $715 million.

The final price is expected to be determined just after the Easter holidays around April 11.

L&T to dock shipyard project in Chennai

Engineering and construction major Larsen & Toubro Ltd (L&T) is expected to choose Chennai for its proposed integrated shipyard project, estimated to cost around Rs 2,000 crore.

According to industry sources, despite huge potential for ship building and fabrication in India, there was hardly any company in India which had the capabilities and size that of the companies in Korea and Japan.

“Given the buoyant economy and the increasing exports from India, L&T wanted to capitalise on the growing demand for ships not only from domestic companies but also from global companies,” the sources added.

L & T which is already into Defence supplies might even venture out into Ships For the Navy in the Future .

The payout of these subsidy would be spread over 10 years or so since Government subsidy accrues to the shipbuilders only when the ships are delivered — and orders for the next five years would extend for much beyond five years. At present, the Government provides a shipbuilding subsidy of 30 per cent, subject to certain conditions, that would end on August 14 this year.

Shipbuilding firms, meanwhile, point out that given the current level of taxes and duties on inputs for shipbuilding like steel-sheets, the industry would return almost 50 per cent of the subsidy benefits to the Government in the initial few years and would return more than the subsidy in subsequent years.

The South Korean companies, the world's three largest shipbuilders, are receiving premium prices for their vessels, fattening profit margins, while a growing backlog will keep their dockyards running at full capacity for years to come.

http://www.marinelink.com/Story/GujaratFinalizingAmbitiousShipbuildingPolicy-209137.html - Gujarat Finalizing Ambitious Shipbuilding Policy

Gujarat, India’s top maritime state by cargo handled at state-owned ports, is finalizing a shipbuilding policy that has set an ambitious target to grab more than half of the country’s shipbuilding market by 2020, an official at the western state’s maritime regulator said.

1) Because of certain regulations, all old crude carriers need to replaced with new double hulled ships. Global ship builders like Hyundai/ Mitsubishi  have their hands full with these orders. So when something like this happens, orders for smaller ships goes to countries like India.

China's shipbuilders - now cranking out everything from hulking supertankers to intricate vessels that ferry liquid gas - are enjoying their best years ever as the country devours resources and the world snaps up its cheap goods.

China won new orders for 1,064 vessels of 67.4 million deadweight tons (dwt) in the first eight months - 43 per cent of the global total, Clarkson Research estimated.

Some analysts believe that the strong momentum on shipyard stocks should continue as many players have locked in contracts at record prices for projects which may take some years to complete.

'Definitely, Chinese shipbuilding is a high growth market but there is some uncertainties whether there will be a capacity glut three, four years down the road,' said Mirae Asset's Mr Cheng

http://www.businesstimes.com.sg/sub/shippingtimes/story/0,4574,254026,00.html - www.businesstimes.com.sg/sub/shippingtimes/story/0,4574,254026,00.html ?

Yeah .....I'm thinking about the same.

Sources say that the end of subsidies may not have an immediate impact on the balance sheets of the shipyards as the global market continues to be hot as also the prices of new ships.

Aided by the Government support and the subsequent boom in the market, the turnover of the shipyards increased from Rs 1,017 crore to Rs 3,657 crore in the last five years, a 259-per cent increase.

A study undertaken by KPMG has shown that the Indian yards face a price disadvantage of about 51 per cent and 41 per cent compared with those in China and Korea. These disadvantages are on account of different taxes, interest on working capital and capital expenditure and bulk purchase discounts on purchase of inputs.

Understood! And I'll just extend the same logic to offshore drilling companies too (that's where my money is). Since each drilling rig can cost even $250 million depending on specifications, the capex intensive nature of the business automatically puts in entry barriers.

you may be the richest man on the earth but in order to get the thing(ships/rigs) , the thing must be available!!!!!!!!! else, you have to wait.....ONGC is sitting on 13500 crores of cash balance and is debt free.....but still it has to lease in the rigs, AHTVs, PSVs and other offshore vessels. Thats because it not only needs them but needs them immediately.....I hope I have made my point clear

The shipyard to come up near Dhamra, 150 kms from Bhubaneswar will be built by APJ-Bharati Shipping Company which had submitted a proposal of Rs 2,200 crore.

Dalwai said as massive industrialisation was taking place in Orissa, the ship building yard would augment the water transport system in the state.

Around 11 ports are coming up in the state, which already has ports at Paradip and Gopalpur. 

• http://www.livemint.com/2007/12/03003826/Korean-shipbuilder-wins-750-m.html - Korean shipbuilder wins $750 mn Indian orders

• http://www.livemint.com/2007/11/29014742/Mercator-enters-shipbuilding-w.html - Mercator enters shipbuilding with Mech Marine Engineers

• http://www.livemint.com/2007/11/27000327/Global-ship-gear-makers-in-tal.html - Global ship gear makers in talks with local firms to set up shop

ABG Shipyard Ltd http://www.bseindia.com/qresann/news.asp?newsid=%7b066170BB-CEB6-4BA9-A8A1-2B52EE35796B%7d - has informed BSE that Lamnalco Ltd, Cyprus has placed repeat order for 2 vessels amounting to USD 34.20 million.

Maridive and Oil Services S.A.E. Egypt has placed repeat order for additional 2 vessels amounting to USD 46 million.

Some concerns+some noise .....article from BS: http://business-standard.com/common/news_article.php?autono=312807&leftnm=4&subLeft=0&chkFlg= - Shipbuilding companies: Weakening frame

Indian Navy warships are world class, at fraction of the cost of the world