16 March 2012

PIL takes stake in Dalian shipyard: Container shipping line invests in 3b yuan ship repair and ship recycling yard

FROM container shipping, Singapore's Pacific International Lines (PIL) has leapt into owning a shipyard for the first time.

PIL yesterday announced an 18 per cent interest in a 3 billion yuan (S$600 million) ship repair and ship recycling yard in Changxing Island, Dalian.

Two others are part of the joint venture: PIL's long-time shipbuilding partner, Dalian Shipbuilding Industry Co (DSIC), which took a 67 per cent majority stake in the 3 billion yuan investment, and steel mill Anshan Iron & Steel Co, which holds the remaining 15 per cent.

Two-thirds of the investment will back Dalian Shipbuilding Industry Marine Services (DSIMS), which will provide 500,000 square metres of space for ship repairs and offshore conversion.

It will welcome the first ship for repair - a bulk carrier - next month, but be fully operational only by the end of the year.

The remaining 1 billion yuan has been sunk into the Dalian Shipbuilding Industry Ship Recycling (DSISR) yard, a green ship recycling facility that complies with environmental and labour standards spelt out in conventions set at the International Maritime Organisation-level.

PIL's executive director, Teo Choo Wee, said the investment will diversify the group's marine interests, which include container manufacturing and logistics capabilities. The ship repair yard will also 'guarantee' PIL, which has a fleet of about 105 ships, yard space for any needed repairs, he said.

DSIMS, the ship repair yard, will likely see revenues of 200 million yuan in 2012 but hit 2 billion yuan in 2014, said its vice-president, Gao Feng.

The ship recycling facility will not record any revenue this year because it will only begin operating at the end of the year, but it is expected to record turnover of an estimated 1 billion yuan in 2014, Mr Gao added.

Mr Gao said shipbuilder DSIC decided on the investment as a way to counter the fall in shipbuilding activity because of the current oversupply of ships.

'Ships will constantly need to be repaired,' he explained. 'Also, ship scrapping looks likely to grow as a business now because ship owners with inefficient vessels would rather send their ships to the scrapyard than be penalised by the high bunker prices.'

Source: The Business Times. By Lyn Kann. 16 March 2012

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