It is understood that on October 19, 2014, Rongsheng Heavy Industries announced to the outside world that it had established a global technology research and development center and operation platform for its offshore engineering business in Singapore - Singapore Rongsheng Maritime Company (Rongsheng Maritime). At the same time as its opening, Rongsheng Maritime signed an order for 1+3 2000-meter deep-water drilling support barges with the Norwegian shipowner Pentacle, with a single price of nearly US$125 million.

　　At the opening ceremony, Chen Qiang stated that the purpose of establishing Rongsheng Maritime was to utilize Singapore's industrial advantages and human and technological resources to focus on ocean engineering business technology research and development, project management, marketing and other high-end value chain businesses. With the increasingly complete layout in the high-end marine equipment manufacturing field, Rongsheng Heavy Industries will accelerate the process of comprehensive transformation and upgrading to offshore engineering. Currently, a senior management team composed of top Singaporean offshore engineering talents, including Don Lee, CEO of Rongsheng Maritime, has been in place, and more offshore engineering talents will be attracted in the future.

　　The news impacted the stock price of Rongsheng Heavy Industries, which had been falling for more than a year, resulting in a 10% and 15% increase on October 18 and 22, respectively.

　　Many industry insiders interviewed said that they were "not at all surprised" by Rongsheng Heavy Industries' establishment of an offshore engineering business platform company in Singapore. Rongsheng Heavy Industries' plan to make a large-scale foray into the offshore engineering market has been in the works for a long time. The difficulty lies in the lack of mature offshore engineering talents, technology, and management levels in China. Establishing its offshore engineering business platform in Singapore solves this problem, paving the way for the subsequent entry of high-end offshore engineering products into the international market. road 。

　　However, some analysts are not very optimistic about Rongsheng Heavy Industries' move. "Rongsheng Heavy Industries' high-profile entry into the offshore engineering industry is because traditional shipbuilding orders can no longer meet its large-scale production capacity. However, this field is unfamiliar to Rongsheng Heavy Industries, with insufficient experience, few customers, and a small market. One wrong step could drag down Rongsheng Heavy Industries."

　　"Due to the country's industrial policies and the scarcity of energy, the concept of offshore engineering manufacturing is currently very popular. Many shipyards hope to transform into offshore engineering to cope with the current order crisis. However, many shipyards have confused the concept, believing that they can do it like shipbuilding, entering first and grabbing orders. In reality, offshore engineering has very high technical requirements for manufacturing alone, not to mention design." An industry insider said, "Offshore engineering vessels and traditional vessels are two different concepts. Traditional vessels can go to dry dock for repairs at any time after sailing at sea, but offshore engineering vessels are offshore and may be immobile in harsh offshore environments for years. Therefore, the requirements for quality and technology are very high, and the warranty period is also longer. In addition, since offshore engineering products are customized and not standardized products, the construction of offshore engineering platforms itself requires strong technical strength and a strong financial foundation. As far as we know, the profit situation of the few offshore engineering manufacturing enterprises in China is not very good, and many are still losing money."

　　The woes of shipbuilding orders

　　The long-term downturn in the shipping industry has caused widespread grief among upstream shipyards. According to data released by the China Shipbuilding Industry Association As of the end of September, the country's completed shipbuilding tonnage reached 41.58 million deadweight tons, a year-on-year decrease of 18.5%. New shipbuilding orders totaled 15.41 million deadweight tons, a year-on-year decrease of 46.9%. According to Clarkson's data, the 180 Chinese shipyards included in the statistics only received orders for 182 ships this year, compared with 561 ships in the same period last year. Among them, 46 shipyards have not produced a single ship this year and have been shut down.

　　Rongsheng Heavy Industries, which once "held on," also suffered from the "order shortage" in the first half of the year. Its semi-annual report shows that in the first half of the year, only two new shipbuilding orders were received, totaling 152,000 deadweight tons, with a total order value of US$55.6 million, a year-on-year decrease of 96% (compared with 28 ships totaling 3.4 million deadweight tons and a total order value of US$1.3 billion in the same period last year); outstanding orders totaled 101 ships, totaling 15.056 million deadweight tons, with a total contract value of US$5.88 billion, a year-on-year decrease of 13% (compared with 109 ships totaling 17.4 million deadweight tons and a total contract value of US$6.751 billion in the same period last year). From June 30 to the time of press, according to internal sources, Rongsheng Heavy Industries only received an order for one 2000-meter deep-water drilling support barge in October. Along with the decline in orders, Rongsheng Heavy Industries' gross profit margin decreased by 5.4 percentage points year-on-year to 17.8% due to the decline in ship prices.

　　The double decline in business volume and profit resulted in dismal performance for Rongsheng Heavy Industries in the first half of the year. Its operating revenue in the first half of the year reached 5.46 billion yuan, a year-on-year decrease of 37%; its net profit was only 216 million yuan, a significant year-on-year decrease of 82%, of which shipbuilding business revenue reached 5.206 billion yuan, a year-on-year decrease of 38.3%.

　　Regarding the decline in new orders and performance, Chang Jianhua, vice president of Rongsheng Heavy Industries, once said: "Rongsheng Heavy Industries' current production and operation are normal. The decrease in new orders is because we don't need to accept some orders. Currently, the longest ship delivery time for Rongsheng Heavy Industries has been scheduled to 2015."

　　An insider at Rongsheng Heavy Industries told reporters in an interview that although the construction of VLOCs is underway in the company's largest No. 3 and No. 4 docks, these docks may be underutilized after the completion of this batch of orders from Vale. Therefore, the inventory of shipbuilding plates in the material storage yards of these two docks has been continuously declining.

　　An industry insider also said: "Rongsheng Heavy Industries' four docks have an annual total production capacity of 8 million tons, but only 150,000 tons have been received so far this year, so it may not be able to meet the demand next year."

　　However, another insider at Rongsheng Heavy Industries said that the decline in the inventory of shipbuilding plates in the material storage yards of docks No. 3 and No. 4 is because dock No. 4 is preparing for the transformation to offshore engineering and is clearing out previous inventory.

　　Hope for transformation to offshore engineering

　　The downturn in the traditional shipbuilding business has accelerated Rongsheng Heavy Industries' pace of transformation to offshore engineering. At the "Rongsheng Heavy Industries Transformation and Development Roundtable" held in September, Chen Qiang said in an interview with reporters that Rongsheng Heavy Industries realized long ago that relying on the model of low-end manufacturing, low cost, and large-scale expansion is no longer enough to win in international competition. Therefore, Rongsheng Heavy Industries urgently needs to develop towards high-profit products. Currently, Rongsheng Heavy Industries has made a lot of preparations in the fields of offshore engineering and LNG business, striving to achieve new breakthroughs in the next two years.

　　According to the information on Rongsheng Heavy Industries' official website, its offshore engineering business has the ability to produce a variety of offshore engineering products, including DPVs, FSO/FPSOs, LNG vessels, and drilling platforms. It has also signed a strategic partnership agreement with China National Offshore Oil Corporation and with the United States classification society (ABS) and DNV GL (Det Norske Veritas Germanischer Lloyd) have launched a strategic cooperation in the R&D of marine engineering products. Currently, its No. 4 dock will mainly be used for the construction of ocean engineering projects, with a scale of 139.5 meters × 580 meters, equipped with a 1600-ton gantry crane, one of the largest lifting tonnage in the world.

　　After possessing manufacturing capabilities and site, the newly established Rongsheng Marine in Singapore is specifically designed to provide a unified platform for order receiving, R&D, project management, and international procurement for Rongsheng Offshore's business.

　　According to Rongsheng Heavy Industries' official introduction, Rongsheng Marine will rely on Rongsheng Heavy Industries' strong shipbuilding and offshore engineering capabilities in China to provide solid high-tech support for the development of offshore engineering business. Through the synergy among the various sectors of the group, it will improve efficiency, reduce costs, fully integrate resources, utilize the advanced offshore engineering technology, strong R&D capabilities, and talent advantages of the Singapore platform, lay out the high-end marine equipment manufacturing field, continuously expand market share, and create a globally renowned offshore engineering brand.

　　The reporter learned that upon the establishment of Rongsheng Marine, it immediately signed an order for 1+3 2000-meter deep-water drilling support barges with the Norwegian shipowner Pentacle. The price of a single barge is nearly US$125 million. If the contract is fully executed, the total price will be nearly US$500 million. According to the information released by Rongsheng Heavy Industries, the drilling support barge is one of the high-tech, high value-added deep-water marine engineering equipment, characterized by a wide range of adaptability to working sea areas and operating water depths, and high cost performance. Its maximum operating water depth can reach 2000 meters, and the drilling depth exceeds 6000 meters, which can meet the needs of oil drilling operations in relatively mild sea areas around the world. Rongsheng Heavy Industries will be the general contractor for this project for the first time, responsible for the design, procurement, and construction of the contract.

　　Chen Qiang said that this order is also another deep-water marine engineering product order received by Rongsheng Heavy Industries after the world's first 3000-meter deep-water laying pipe crane ship. Rongsheng Heavy Industries' ability to undertake this offshore engineering project fully demonstrates its technical strength and production capacity in the field of marine engineering, and also fully proves the international shipbuilding and offshore engineering industry's recognition of Rongsheng Heavy Industries.

　　According to an insider of Rongsheng Heavy Industries: "Because the No. 4 dock is currently operating at full capacity to produce VLOCs, this drilling support barge order may not start immediately, but the interval will not be too long."

　　The Role of Singapore

　　Regarding the consideration of establishing an offshore engineering base in Singapore, Chen Qiang said that Singapore is a world leader in the offshore engineering field, with a superior geographical location and a firm policy support environment. After years of development, it has abundant resources in market, technology, talent, and capital, and has become a global center for offshore engineering development. In addition, Singapore has a vibrant offshore equipment trading market, gathering a large number of globally renowned oil and gas exploration and oilfield service companies, with a large number of high-quality offshore engineering customers and relatively large order receiving space. Therefore, it is also a global platform for information exchange in the offshore engineering market.

　　Moreover, the Singapore government has provided strong and comprehensive support to local offshore engineering enterprises. Rongsheng Marine, headquartered in Singapore, will also benefit from the Singapore government's various support measures for offshore engineering enterprises, gaining development advantages in taxation, industrial policies, and development guidance.

　　"Singapore has abundant offshore engineering talent resources, gathering high-end professional talents from offshore engineering design and manufacturing enterprises around the world. In addition, the Chinese in Singapore share the same language and culture with the Chinese, and there is a natural communication advantage, which is more conducive to business exchanges and cooperation. Singapore has world-leading offshore engineering R&D and design technology, an open financial investment environment, and a superior geographical location. Establishing a global office network centered on the Singapore office can solve the worries of high-end talents working in different places." said Chen Qiang.

　　Chen Qiang believes that under the circumstances of insufficient domestic technology and assembly capabilities, fully integrating Singapore's offshore engineering development advantages and resources to form core market competitiveness and quickly seize the offshore engineering market will bring opportunities for the company's offshore engineering business development.

　　The Mystery of Li Fugen's Joining

　　In addition to the various advantages of Singapore itself, the joining of Singaporean offshore engineering expert Li Fugen to Rongsheng Marine as CEO has also brought much speculation to the industry. Public information shows that Li Fugen has more than 40 years of experience in offshore engineering. Before joining Rongsheng Marine, he served as Executive Director of Sembcorp Marine, Senior General Manager of Jurong Shipyard, Senior Vice President of Sembcorp Marine's Market Department, General Manager of Jurong Shipyard Brazil, and General Manager of PPL Shipyard. He has high achievements and reputation in the offshore engineering field, maintaining close cooperation with many shipowners and oil companies, and enjoys high prestige in the industry.

　　Under Li Fugen's leadership, Sembcorp Marine and Jurong Shipyard have both become well-known enterprises in the international offshore engineering field. In particular, Jurong Shipyard, since 1996, Li Fugen successfully transformed it from a ship repair yard into a global leading enterprise providing general contracting services in the near-shore oil and gas industry.

　　Rongsheng Heavy Industries believes that Li Fugen's joining will provide strong impetus to the development of Rongsheng Marine, not only helping the company improve its industry influence in a short period, but also helping to improve the speed and depth of Rongsheng Heavy Industries' transformation in the offshore engineering field.

　　An insider of Rongsheng Heavy Industries revealed that Li Fugen's joining this time is not simply a work-related addition, but a direct shareholding. It is understood that Rongsheng Heavy Industries only holds an absolute controlling stake in Rongsheng Marine, not a sole proprietorship, and the other shareholder of Rongsheng Marine is likely to be CEO Li Fugen himself.

　　"Establishing Rongsheng Marine in Singapore and introducing Li Fugen, a leader in the offshore engineering field, as a partner is similar to the model of setting up a factory in Nantong four years ago and introducing Chen Qiang, a leader in shipbuilding." An industry insider said, "Rongsheng Heavy Industries has always believed in the philosophy of 'establishing a factory with people,' because for the shipbuilding industry, talent and management are the most crucial." Equipment and technology can be purchased later with money.

　　Transformation Success or Failure Uncertain

　　Rongsheng Heavy Industries' "big gamble" in transforming its offshore engineering business is based on the judgment that the global offshore engineering business still has enormous development potential compared to the traditional shipbuilding industry.

　　According to relevant plans, in 2015, China's offshore engineering industry's annual sales revenue reached over 200 billion yuan, and the industrial added value rate increased by 3 percentage points compared to the end of the Eleventh Five-Year Plan, with the international market share of marine oil and gas development equipment reaching 20%; in 2020, the annual sales revenue of the offshore engineering industry reached over 400 billion yuan, and the industrial added value rate increased by another 3 percentage points, with the international market share of marine oil and gas development equipment reaching over 35%. This year, the state has included the high-end equipment manufacturing industry for marine engineering in the national strategic emerging industries and will continue to support it in terms of policies.

　　However, a domestic shipbuilding expert holds a cautious attitude towards shipyards' transformation into the offshore engineering industry: "Actually, most domestic offshore engineering projects are currently in a loss-making stage. Many shipyards, including CIMC Raffles, ZPMC, and Shanghai Waigaoqiao Shipbuilding, are burning money on projects. Offshore engineering projects have their particularities; they are basically customized for specific projects and do not have the capacity for mass production. The upfront investment in these projects is also enormous, requiring shipyards not only to have strong technical and design capabilities but also strong financial strength. Even powerful shipyards, once blindly transforming into the offshore engineering field, easily encounter a series of problems such as profitable orders, unsustainable follow-up orders, high costs, and broken capital chains."

　　"Without mentioning the global and national situations, just taking the shipyards along the Jiangsu Yangtze River as an example, COSCO Shipyard's platforms, Wison Offshore's modular floating cranes, Jiaolong Heavy Industry's modular segments and some engineering barges, Hantong's FPSOs, and Pacific and Mingde's PSVs have already reached a certain level of capability in terms of technology and experience, and they also have many long-term cooperative clients. Compared to them, Rongsheng Heavy Industries does not have an overwhelming technological advantage in the short term, and its customer base is relatively weak. Unless there is a high-level entry point, it will be difficult for Rongsheng Heavy Industries to make progress in offshore engineering business." said an insider in the marine industry.

　　However, this person also stated that due to the joining of legendary figures in the offshore engineering industry like Li Fugen, Rongsheng Heavy Industries' transformation into the offshore engineering industry may be full of speculation.