A Record of the Formation of Nantong Xiangyu Offshore Engineering

The global shipbuilding market remains in a downturn. However, for companies like Xiangyu, the market's deep adjustment also means greater opportunities.
The establishment of Nantong Xiangyu represents a perfect strong alliance and the combination of numerous advantages.
Nantong Xiangyu will use its experience in building PCTC (Pure Car and Truck Carrier) as a foundation, gradually expanding into passenger and roll-on/roll-off ships and luxury cruise ship businesses; using its experience in building chemical tankers as a foundation, gradually expanding into the LPG (liquefied petroleum gas) and LNG (liquefied natural gas) carrier business; accelerating expansion into dual-fuel and LNG-fueled vessels.
Seeking Opportunities Amidst Adjustment: Nantong Xiangyu Sets Sail
On a sunny spring afternoon, we visited Nantong Xiangyu Ocean Equipment Co., Ltd. At this factory site, which had been abandoned for over two years, a bustling construction scene unfolded – workers were making final preparations for the factory's resumption of operations.
Established in October 2004, Nantong Mingde Heavy Industry Co., Ltd. was once one of Nantong's three most well-known shipbuilding companies. Due to poor management, Mingde declared bankruptcy in December 2014.
At the end of last year, Xiamen Xiangyu Co., Ltd., COSCO Heavy Industry Group Co., Ltd., and Nantong Tongbao Shipbuilding Co., Ltd. jointly established Nantong Xiangyu Ocean Equipment Co., Ltd. In less than a month, this new company invested 576 million yuan to acquire Mingde Heavy Industry, reviving this shipbuilding industrial center that had been dormant for two years.
The shipbuilding industry is a globally integrated industry, closely related to the world economy and trade. After the 2008 financial crisis, the international shipping market has shown a general weakness, and this state may continue for some time.
Under these circumstances, does the acquisition of Mingde mean taking on huge risks?
In response, Deng Qidong, director and general manager of Xiangyu Co., Ltd., and chairman of Nantong Xiangyu Ocean Equipment Co., Ltd., offered his unique insights. He said that it is undeniable that the global shipbuilding market is currently in a downturn; however, in the long term, the market's deep adjustment holds even greater opportunities.
He believes that for the industry, continuous market stagnation has eliminated the less competitive players, and the future will be a competition between strong players. As a "weather vane" for the global shipping industry, the Baltic Dry Index has shown since the second half of last year that the shipping industry's coldest period has passed, and it is now in a U-shaped bottom consolidation phase, with market recovery imminent.
From Xiangyu's perspective, entering the market when others are pessimistic is commercially logical. As the ancient sage Fan Li once said, ‘Buy low, sell high; when others abandon, I take; when others take, I give.’ This is precisely what we are doing now,” said Deng Qidong.
Looking back at the history of global shipbuilding over the past century, any major market adjustment has been a key turning point in the restructuring of the shipbuilding industry landscape. Currently, a "tripartite" competitive structure of China, Japan, and South Korea has emerged in the global shipbuilding industry. In the face of this crisis, China's shipbuilding industry has demonstrated stronger resilience, greater market tolerance, and greater development potential. Data shows that in the first three quarters of 2016, China, Japan, and South Korea's share of international shipbuilding orders was 70%, 12%, and 15%, respectively.
While there is a general oversupply of capacity, certain ship types, such as roll-on/roll-off ships, chemical tankers, and multi-purpose vessels, are experiencing significant market demand due to the mandatory implementation of new standards and regulations, coupled with aging vessels and low ship prices. This creates conditions for shipbuilding companies to specialize in specific sectors and develop advantageous areas.
According to the Ministry of Industry and Information Technology, the demand for ships is expected to bottom out and rebound during the 13th Five-Year Plan period (2016-2020), with a potential recovery to 80 million deadweight tons from 2018 to 2020. As ships reach their scrapping age, the annual demand for new ships is expected to rebound to around 85 million deadweight tons from 2021 to 2025, and potentially exceed 100 million deadweight tons from 2026 to 2030.
Deng Qidong said that all this indicates that the launch of Nantong Xiangyu is timely. Regarding Xiangyu's establishment in Nantong, relevant officials from the Municipal Economic and Information Commission believe that it is crucial for boosting industry confidence and alleviating the current difficulties in Nantong's shipbuilding industry. At the same time, it will play a positive role in promoting the transformation and upgrading of Nantong's shipbuilding industry and rebuilding a world-class shipbuilding base.

Strong Alliance, Synergistic Advantages, and Bursting Vitality
Xiangyu Group, a state-owned enterprise headquartered in Xiamen, is committed to building a value ecosystem of symbiosis and mutual benefit. Its investments span supply chain management and distribution services, public service platforms and industrial real estate development, real estate, quasi-financial services and equity investment, new industry investment, and industry + internet. Since its inception on November 28, 1995, a spirit of pioneering and high marketization has been its hallmark. They always find the best balance between government goals and market laws. While highly market-oriented, Xiangyu steadfastly adheres to the business philosophy of ‘risk first, profit second, scale third,’ innovating the state-owned enterprise development model with its unique Xiangyu model of ‘building platforms and promoting mutual benefit.’
By the end of 2016, Xiangyu Group had over 200 invested enterprises, with operating income exceeding 120 billion yuan, ranking among China's Top 500 Enterprises for many years.
Xiangyu Co., Ltd., a subsidiary of Xiangyu Group listed on the A-share market, has established strong supply chain service capabilities in agricultural and sideline products, metal materials and mineral products, energy and chemical products, electromechanical products, and daily necessities, with a service network spanning both domestic and international markets. It ranks 4th among China's Top 50 Logistics Companies; in 2016, it achieved revenue of 119.067 billion yuan, a year-on-year increase of 99%.
The partner in this cooperation, Zhonghai Heavy Industry, is a Hong Kong main board listed company (HK0651), with main businesses covering shipbuilding, smart parking, automotive electronics, financial services, and other fields; Tongbao Shipbuilding, on the other hand, is a local medium-sized shipyard in Nantong that integrates ship trade, shipbuilding, ship repair, and steel structure processing. Tongbao Shipbuilding and Zhonghai Heavy Industry, both long engaged in the shipbuilding industry, have a thorough understanding of this industry and possess sufficient familiarity and professionalism in this field. Furthermore, the innovative and breakthrough capabilities formed by private enterprises in fierce market competition are also their strengths.
Deng Qidong believes that the coming together of these three enterprises is a true strong alliance, and through their efforts, they can achieve the goal of 1+1>2.
Nantong has always been a shipbuilding base in China integrating shipbuilding, ship repair, and offshore engineering. Nantong shipyards have created multiple "firsts" in China and even the world, which has allowed Nantong to occupy an advantageous position and high-end market in the international shipping market. At the same time, the Nantong municipal government actively promotes the transformation and upgrading of the shipbuilding industry and provides strong policy support, which provides a good external environment for the future development of Nantong Xiangyu.
Nantong Xiangyu Terminal is located downstream of Hongbeisha, Wujie Town, Tongzhou District, on the north side of the Nantong section of the Yangtze River. It is in the core area of Nantong's concentrated shipbuilding zone, with extremely high industrial agglomeration. The water depth at the front of the terminal is approximately -7 meters, which can ensure the passage of fully loaded vessels of 3,000 to 5,000 tons. The natural water level conditions are excellent, allowing for the manufacturing of 300,000-ton large vessels.
Deng Qidong said: "The superposition of all advantages will make Nantong Xiangyu burst with endless vitality, and the future of Nantong Xiangyu is very promising."
In fact, since early February this year, Nantong Xiangyu's entry into the former Mingde Heavy Industry site has completely transformed its appearance.
At the beginning of their entry, the factory area was in a state of disrepair, and the reeds at the front of the dock had even grown taller than a person. Over the past two months, Nantong Xiangyu has invested 140 million yuan in re-planning and organizing the workshops, inspecting and repairing equipment, and optimizing and streamlining production lines. At the same time, they have also equipped and improved infrastructure such as roads, water, electricity, and gas in the factory area. Currently, preparations for resuming work are basically complete—in Nantong, the Xiangyu people have once again created the "Xiangyu speed."
After more than two years of shutdown, resuming work requires not only hardware investment but, more importantly, rekindling the human spirit. Many employees of Nantong Xiangyu were retained staff from the former Mingde Heavy Industry, and after experiencing the company's bankruptcy and layoffs, their morale was once low. However, during the interview, everyone we saw was enthusiastic, and long-lost smiles returned to their faces.

  Targeting Niche Markets: Specializing and Strengthening in Three Major Directions
Although the global shipbuilding industry as a whole is still in a slump, China, as a major shipbuilding nation in the world, is gradually stabilizing after several years of industry adjustments; in the specialized field of chemical tankers, although the growth of chemical tanker capacity in China is currently under national capacity control restrictions, the global demand for chemical tankers is on the rise.
Based on this analysis, combined with Nantong Xiangyu's current infrastructure configuration, the comprehensive advantages of its project investors, and the current state of the shipbuilding industry, Nantong Xiangyu aims to become the world's largest chemical tanker manufacturer.
In addition, its initial product positioning will also focus on small car roll-on/roll-off (Ro-Ro) vessels for inland rivers and coastal feeder lines (1,000-2,000 cars), large Ro-Ro vessels (4,000-8,000 cars), multi-purpose vessels of 10,000-40,000 tons, and heavy lift vessels as the main vessel types.
According to Zhu Jianhua, Vice Chairman of Nantong Xiangyu Marine Equipment Co., Ltd., although the company is currently in the preparation phase before resuming operations, it already has several ship orders in hand. Among them, a 38,800-ton duplex stainless steel chemical tanker will be the second largest vessel of its kind in the world. The technical and craftsmanship level of this vessel is extremely high, which will be a test for the new Nantong Xiangyu team.
Zhu Jianhua also told reporters that with Nantong Xiangyu's current production capacity, it can simultaneously build two 50,000-ton class vessels and undertake the construction of 17 vessels per year. He stated that they plan to take about three years for the company to reach full-load production, at which point the company's annual output value could reach 7 billion yuan.
Those who do not plan for the long-term will not be sufficient for the short-term. While planning for short-term goals, Nantong Xiangyu has long had a vision for the company's long-term future.
Based on changes in market demand and the widespread applicability of environmental policies in the international and domestic shipping industries, Nantong Xiangyu's future business development and innovation will focus on three major directions: building on the experience of constructing car carriers, gradually expanding into passenger Ro-Ro vessels and luxury cruise ship businesses; building on the experience of constructing chemical tankers, gradually expanding into LPG (liquefied petroleum gas) and LNG (liquefied natural gas) vessel businesses; and accelerating expansion into dual-fuel powered vessels and LNG-fueled powered vessels.
As a professional manager of a state-owned enterprise, Deng Qidong also harbors another sentiment in his heart.