After years of production suspension, shipbuilding is about to resume! Jiangxi's largest shipyard is expected to restart.

With the booming new shipbuilding market, Jiangzhou United Shipbuilding, the largest shipyard in Jiangxi Province that has been shut down for many years, is expected to restart its shipbuilding business.

On October 31, COSCO Heavy Industry, a Hong Kong-listed company, issued an announcement disclosing the latest developments in its business, stating that it will strive to adjust its shipbuilding business model and undertake the construction of medium-to-large-sized vessels.

The announcement points out that the normal resumption of shipbuilding business is a key focus of the group in recent years, and is also a key factor in obtaining government support for the restructuring of the group's shipbuilding assets. The group will continue to seek opportunities to adjust the operating model and product structure of its shipbuilding business in order to resume shipbuilding operations as soon as possible. On the other hand, the group's smart parking and automotive electronics businesses are in a period of adjustment; at the same time, the group is now using existing resources to integrate steel structure engineering and installation business, which is the group's main business focus in the short term.

While gradually restoring the profitability of various business segments, COSCO Heavy Industry will also strive to adjust its shipbuilding business model, undertaking the entire shipbuilding process of medium-to-large-sized vessels, including purchasing raw materials and assembling all parts of the vessels. Previously, this typically required more capital investment and longer construction times. The company will shift towards more subcontracting or different processes of processing or modification shipbuilding service projects, with shorter revenue cycles, to reduce capital investment and reduce business and operational risks in the face of a deteriorating economic situation, unfavorable industry environment, and worsening group financial conditions, increasing the group's liquidity.

In addition to the above measures to adjust the business model and project scope, COSCO Heavy Industry will, within the scope of its existing shipbuilding business, utilize the abundant assets and resources of the shipbuilding production base along the Yangtze River in Jiangxi Province to cope with the unfavorable situation in the shipbuilding industry and broaden its revenue sources, including the construction of berths with cranes, warehouses, and ancillary facilities for loading and unloading, to obtain loading and unloading fees and wharf rental income.

It is understood that COSCO Heavy Industry was listed on the Hong Kong Stock Exchange on July 23, 1998. COSCO Heavy Industry Group Co., Ltd. is a main board listed company in Hong Kong (HK0651), whose main businesses cover shipbuilding, smart parking, automotive electronics, and financial services. COSCO Heavy Industry's previous shipbuilding businesses in China included Jiangzhou United Shipbuilding and Nantong Huakai Heavy Industry, but Nantong Huakai Heavy Industry has gone bankrupt. The announcement does not explicitly state the name of the Jiangzhou production base; however, judging from the distribution of COSCO Heavy Industry's shipbuilding assets in China, the production base should be Jiangzhou United Shipbuilding.

It is understood that Jiangxi Jiangzhou United Shipbuilding Co., Ltd., founded in 1971 (formerly Jiangxi Jiangzhou Shipyard), is a shipyard with a long history. It is the largest and most technologically advanced shipyard in Jiangxi Province, and one of the first shipyards to be included in the national "white list" of "Shipbuilding Industry Standard Conditions." It has a stable customer base and a good reputation for quality in the fields of multi-purpose heavy lift vessels and chemical tankers. The factory area has four large workshops covering 10,000 square meters, three 20,000-ton shipways, a 500-meter inland outfitting wharf, a 360-meter Yangtze River outfitting wharf, and a 6,500-ton floating dock. It has the capacity to design and manufacture various 20,000-ton vessels and build 300,000 deadweight tons of ships annually. Since its establishment, it has successfully built more than 200 ships, exporting to many countries and regions around the world, including Singapore and Germany. In recent years, Jiangzhou's shipbuilding business has been in difficulty, and COSCO Heavy Industry has been seeking opportunities to integrate Jiangzhou's shipbuilding business.

March 2018: Shipbuilding cooperation with Yangtze River Shipbuilding

On March 13, 2018, COSCO Heavy Industry, the Ruichang Municipal Government, and Yangtze River Shipbuilding signed a cooperation framework agreement on potential cooperation. According to the agreement, the Ruichang Municipal Government plans to designate a limestone mining area in Huangjin Township, Ruichang City (this limestone mining area has approximately 500 million tons of limestone deposits), and the contracting parties will establish a joint venture company to participate in the public bidding for this limestone mine. The Ruichang Municipal Government agreed to transform the outfitting wharf of Jiangzhou Shipbuilding into a sandstone wharf, which will be used to transport sandstone manufactured and produced by the joint venture company.

Shortly afterwards, COSCO Heavy Industry, Yangtze River Shipbuilding, and Xingda Mining signed a memorandum of understanding to promote the potential cooperation under the cooperation framework agreement. The contracting parties of the memorandum of understanding will establish a joint venture shipbuilding company in Ruichang City, which will be managed by a Singapore-listed company. The joint venture shipbuilding company will lease relevant production sites and facilities from Jiangzhou Shipbuilding to develop its shipbuilding business, with an annual output of 4 to 6 20,000-ton vessels. The Singapore-listed company will assist Jiangzhou Shipbuilding in finding new buyers for 3 vessels out of 7 vessels that may have had their orders cancelled by 3 customers. Jiangzhou Shipbuilding will then sell the 3 cancelled vessels to the joint venture shipbuilding company at a reasonable price, so that the joint venture shipbuilding company can continue the construction project and subsequently sell the completed cancelled vessels to new buyers.