Shipbuilders feel the Bubble Bursting in China

Dongfang's swinging fortune's tell the story: High flying last August and a listing on the London Stock Exchange's Alternative Investment Market, but months later ship orders were being canceled or simply not paid, the management resigned, trading on the stock was suspended by March, by June of this year creditors were seizing assets. The builder now sits abandoned, the owners appear to have fled the country as they have not been seen.

One is sorely tempted to presume they had set up family escape plans and property in the U.S., New Zealand or Canada.

In China, shipbuilders languish after bubble bursts

Five-star hotels sprouted along with machinery depots and metal shops. European luxury cars darted past heavy trucks on the bustling streets.

But in another sign ofChina'seconomic slowdown, shipyards are now closing and half-finished vessels lie rusting in the humid haze. Prosperity is receding like the tide.

"Many companies collapsed," said Liu, 48, who recently took a lower-paying job building a sea bridge. "There used to be so much energy and life here. Now they don't build ships anymore."

The bellwether industry's troubles have their roots in a shipping boom that started a decade ago. Global investors rushed to finance new vessels needed to haul coal and copper to China's humming factories and to transport finished electronics, toys and other exports out. China went from producing just over 100 vessels in 2002 to more than 1,000 in 2010, according to Worldyards, a Singaporean-based shipping industry research firm.

But China's growth has hit a wall. The China Assn. of the National Shipbuilding Industry reported Chinese ship orders declined 47% to 9.54 million deadweight tons the first five months of this year from the same period last year. Meanwhile, ship exports slumped 48% from a year ago to 6.84 million deadweight tons (a measure of the maximum weight a ship can carry).

And it will not be improving for a long time . . .

"Huge overcapacity hurting shipping"

"The shipping sector is going through a terrible and dark period, and you have to remember that without shipping there is no international trade. The current situation will continue for at least two years and perhaps even three and meanwhile there is no hope for change," . . .

He said, "The difficult situation sweeping through the sector is caused by a combination of factors: the rise in the cost of fuel, the economic slowdown and above all else huge overcapacity in shipping among other things because of China. The pessimistic picture that I am painting is far worse in reality."