Yangzijiang

Yangzijiang: According to Platts, a number of Chinese firms are seeking to order Very Large Gas Carriers (VLGCs). China does not have a VLGC fleet, but with imports expected to rise along with developments of several propane dehydrogenation plants, China may seek to cut costs by developing its own fleet for long distance trips. China Oriental Energy (Donghua Energy) is building a 1.2m mt/year PDH plant for producing propylene at Zhangjiagang and is said to have placed orders for six VLGCs, with up to 16 options at a Chinese yard. Platts’s sources said that discussions between China Oriental Energy and Yangzijiang could be restarted, but a final agreement has yet to be reached. Meanwhile, YZJ’s Xinfu yard has plans to build large vessels and has an annual production capacity of up to 10 Very Large Crude Carriers (VLCCs). Still, YZJ’s capabilities remain primarily in containerships and bulk carriers, hence it could be early days yet before YZJ sees orders for VLGCs. Currently, China’s top VLCC yards are mainly held by China State Shipbuilding (CSSC) and China Shipbuilding Industry Corporation (CSIC), which are state-owned firms. With more than 1,500 yards in China, YZJ’s CEO expects that more than half of the country’s yards will have to be closed down, and of the remainder, only 20% are likely to be profitable. OCBC believes it is imperative for YZJ is to continue its smooth execution, secure orders (albeit at almost breakeven levels), scale up the value chain by building green vessels and developing its offshore capabilities, while waiting for the industry consolidation to run its course. Should it be one of the few large yards left standing when the dust has settled, YZJ would then find itself in a stronger position than before. The house maintains its Hold rating with TP $0.99.