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CSIC-CSSC Re-Merger Completed

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By The Maritime Executive 11-26-2019 04:57:44

China State Shipbuilding Corporation (CSSC) and China Shipbuilding Industry Company (CSIC) have finalized their re-merger, creating a new shipbuilding leviathan named China Shipbuilding Group Corporation. The firm is now the world's largest shipbuilder by sales and backlog, with 20 percent of global market share, $110 billion in assets and more than 300,000 employees up and down China's eastern seaboard. 

Hao Peng, Communist Party of China secretary and director of the powerful State-Owned Assets Supervision and Administration Commission (SASAC), attended an inaugural CSSC board meeting held Tuesday in Beijing. CSSC chairman and group party secretary Lei Fanpei and CSSC general manager Yang Jincheng attended in their existing capacities, retaining their posts at the head of China Shipbuilding. 

Image courtesy CSSC

The merger essentially restores CSSC to its original form. The company spun off CSIC as a separate entity in 1999, giving the new company control of government-owned yards in northern China. CSIC's assets include Dalian Shipyard, Bohai Shipyard, Wuchang Shipyard and a wide variety of associated suppliers, manufacturers and research labs. It had annual sales in the range of $50 billion in 2017.

After the split, CSSC retained China's southern shipyards, including Shanghai Waigaoquiao, Jiangnan Shipyard and Hudong-Zhonghua Shipbuilding. It took in about $30 billion in sales in 2017. The re-merged company will account for fully half of new orders and repair contracts from Chinese shipowners, along with the bulk of China's naval shipyard activity.

The merger was widely anticipated long before its formal announcement. CSSC has been undergoing a series of management changes and restructurings over the past year, leading to extensive speculation that it could be preparing for a merger. It denied the rumors until July, when its publicly-listed subsidiaries confirmed the plans in stock market filings. SASAC announced its final approval in late October. 

A proposed $1.7 billion merger between two of CSSC's top competitors, Korean shipbuilders Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering, formally kicked off in March. However, it will have to passs muster with antitrust regulators and overcome opposition from union members, who are concerned that it would lead to consolidation and job losses. The two issues are related: DSME's union has appealed to Korean antitrust regulator Joh Sung-wook and the European Union's competition commission in order to expess its displeasure with the idea of a merged HHI-DSME. The union has also blocked HHI personnel from visiting DSME's Geoje Shipyard.

A combined HHI-DSME would hold 60 percent of the world market for LNG carriers, raising concerns about competition in this specialized high-value segment.