Restarting shipbuilding business through "shell-swapping"? Rongsheng Heavy Industries' first order is imminent.

After years away from the market, Rongsheng Heavy Industries, once China's largest privately-owned shipbuilding company, is poised to restart its shipbuilding business.

Order for 10 bulk carriers! Will Rongsheng Heavy Industries, under a new name, return to the new shipbuilding market?

According to foreign media reports, Rongsheng Heavy Industries recently signed a letter of intent with a subsidiary of Greek shipowner George Economou for the construction of 10 bulk carriers, including 4 180,000-dwt Capesize vessels and 6 82,000-dwt Kamsarmax bulk carriers, plus an option for 4 more Kamsarmax bulk carriers. Each Kamsarmax bulk carrier is priced at US\$33 million, and each Capesize vessel at US\$62 million, with the first vessel to be delivered in the third quarter of 2024. If all optional vessels are confirmed, the total value of the order for 14 vessels will reach US\$578 million (approximately RMB 4.203 billion).

Based on the current order information, the prices of these new vessels are significantly lower than market prices. In comparison, Clarkson's data shows that the price of a new 176,000-180,000-dwt Capesize vessel is US\$62.5 million, while a new 80,000-82,000-dwt Kamsarmax vessel is US\$35.5 million.

George Economou is no stranger to Rongsheng Heavy Industries. His subsidiary, Cardiff Marine, ordered 3 Suezmax tankers from Rongsheng Heavy Industries in 2010, which were delivered in 2014-2015. In addition, another company under George Economou, Dryships, ordered 4 Panamax bulk carriers from Rongsheng Heavy Industries in 2010, but this order was cancelled in early 2014 due to the shipyard's financial problems and inability to deliver the vessels.

According to TradeWinds, citing sources, Rongsheng Heavy Industries is returning to the shipbuilding industry because major Chinese shipbuilders have full order books and their dry docks are mostly booked for the next few years. Founder Zhang Zhirong has hired former Chief Operating Officer David Luan to restart Rongsheng Heavy Industries.

It is understood that Luan joined the shipyard when Rongsheng Heavy Industries was first established, initially as General Manager of the Marketing Department, and was later promoted to Chief Operating Officer. Prior to this, he worked for nine years at Nantong COSCO KHI Ship Engineering Co., Ltd., a Sino-Japanese joint venture. In 2014, after leaving Rongsheng Heavy Industries, Luan joined Pacific Shipbuilding Group as Chief Marketing Officer, leaving in 2015. Subsequently, Luan established a company engaged in online ship equipment trading.

There are reports that Rongsheng Heavy Industries' order may be a "shell order" to avoid huge debts, including employee salaries. It is understood that Rongsheng Heavy Industries will be renamed SPS Shipyard. SPS is likely an abbreviation for ShipParts.com, the ship equipment/spare parts/service integrated trading platform founded by Luan, but the shipyard's official Chinese name has not yet been announced.

Sources revealed that the renamed SPS Shipyard will start selling delivery schedules for Capesize and Kamsarmax bulk carriers next week, with the next available delivery date starting from the third quarter of 2025. The shipyard is currently carrying out preliminary preparations such as equipment maintenance and dredging of dry docks. The yard has two gantry cranes and is basically fully equipped, and plans to officially start construction in March next year.

Rongsheng Heavy Industries built Vale's first 400,000-ton VLOC, the "VALE CHINA".

Earlier this year, there were rumors that Rongsheng Heavy Industries would return to the shipbuilding market. At that time, there were reports that Vale, the Brazilian mining giant, planned to build 14 300,000-ton very large ore carriers (VLOCs) and had contacted several Chinese shipyards, including Qingdao Beihai Shipbuilding, Yangzijiang Shipbuilding Group, Nantong COSCO KHI Ship Engineering, New Times Shipbuilding, and Jiangsu Rongsheng Heavy Industries, all of which have experience in building VLOCs for Vale.

However, industry insiders questioned this at the time, because Rongsheng Heavy Industries had already sold most of its valuable equipment and a large gantry crane, and the shipyard had not been operational for many years. Restarting operations would require a large amount of capital, and Rongsheng Heavy Industries would find it difficult to obtain financing and advance payment guarantees from financial institutions. The sourcing of a large number of management personnel, technicians, and skilled workers was also a major problem.

Once China's largest single shipyard, it withdrew from the shipbuilding market due to a debt crisis.

It is understood that Rongsheng Heavy Industries officially started construction of its shipyard in Nantong in October 2005. Just four months later, in February 2006, it received an order for 6 75,500-dwt ice-class bulk carriers from Norwegian shipowner Golden Ocean. That year, the shipyard received orders for 19 bulk carriers and 30 Suezmax tankers, with a contract value exceeding US\$3 billion, making it the Chinese private shipyard with the most orders and ranking among the top 20 shipyards globally.

From the start of construction to the delivery of the first vessel, it took only 28 months, setting a record for the shortest shipyard construction cycle in the history of shipbuilding and becoming the largest privately-owned shipbuilding company in China at the time.

In 2010, Rongsheng Heavy Industries was listed on the main board of the Hong Kong Stock Exchange. From 2010 to 2012, Rongsheng Heavy Industries' order book consistently ranked first in China. Even in the first half of 2014, Rongsheng Heavy Industries still ranked second in China with 90 vessels and a total of 11.5 million dwt of orders. However, from 2012 onwards, Rongsheng Heavy Industries fell into a debt crisis. At the peak of its debt, the total loans from financial institutions to Rongsheng Heavy Industries once exceeded RMB 25 billion.

As the largest single shipyard in China, Rongsheng Heavy Industries had four large dry docks, equipped with six 900-ton gantry cranes, one 600-ton gantry crane, and one 1600-ton gantry crane, the largest in China. It had eight outfitting wharves and two material wharves, as well as supporting modern facilities and equipment, including steel plate pre-treatment workshops, component factories, flat and curved section workshops, pipe manufacturing workshops, and painting workshops, with a designed annual shipbuilding capacity of 8 million dwt. Dry docks 1 to 3 were completed between 2005 and 2009, and dry dock 4 was completed and put into operation in 2011.

In 2014, Rongsheng Heavy Industries suspended trading for restructuring. That year, Rongsheng Heavy Industries lost RMB 7.75 billion, and the number of cancelled orders reached 59. In 2015, China Rongsheng Heavy Industries Holdings Co., Ltd., listed in Hong Kong, was renamed China Huarong Energy Co., Ltd. In 2018, Huarong Energy announced the sale of its shipbuilding and engineering business for HK\$1, shifting its focus to energy exploration and production.

In 2019, Rongsheng Heavy Industries sold two 900-ton gantry cranes within its plant area to Biomass and Zhoushan Changhong International. Currently, Jiangsu Rongsheng Heavy Industries Co., Ltd. and its subsidiary Jiangsu Rongsheng Shipbuilding Co., Ltd. are in an active status. Both companies still own docks No. 1 and No. 4. Among them, Dock No. 4, as the largest dock Rongsheng Heavy Industries invested in that year, is 580 meters long and 138.5 meters wide, equipped with one 1600-ton large-span gantry crane and one 600-ton gantry crane, capable of simultaneously commencing the construction of 2.5 400,000 DWT VLOCs; in addition, it also possesses a 1382-meter second-phase outfitting quay (4 berths), a third-phase outfitting quay (3 berths), etc.

According to Clarkson's data, the last ship built by Rongsheng Heavy Industries was delivered in 2017. From 2008 to 2017, over 9 years, Rongsheng Heavy Industries delivered a total of 94 vessels, with a total deadweight of approximately 16.43 million DWT, including 16 Vale 400,000 DWT Valemax bulk carriers, 39 bulk carriers, 36 oil tankers (including 1 VLCC), 2 6552TEU container ships, and 1 pipelay vessel.