Read? Kep Corp: 3Q & 9M 2013 REPORT CARD
Record Net Order Book at S$13.6 billion but lower revenue @ 9M 2013
Read? Singapore Rig Builders Fend Off Chinese, Korean Competition
"There's a substantial glut in shipbuilding capacity in China and the yards aren't getting orders so they're making a push into offshore rig markets," Religare Capital analyst Vincent Fernando was quoted in the report, which noted that China may rival Singapore in terms of rig production capacity by 2015.
With little signs of a recovery in the global shipbuilding sector, Chinese and South Korean yards are incentivized to win contracts in the offshore construction markets – including rigs – to compensate for the dip in new ship orders. Yards struggling to stay afloat in China – the world’s largest shipbuilder according to Clarkson Research – are tempted to undercut market prices for newbuild rigs in order to win contracts.
In addition, Chinese yards offered attractive payment terms to lure customers compared to Singapore yards, which based their contracts on milestone payment structure. Analysts noted that Chinese yards have cut down payment requirements to as low as 2.5 percent of contract value compared with 20 percent before 2010.
“Chinese yards were desperate because they ran out of conventional ships to build … they were offering crazy terms to attract customers,” Keppel’s CEO Choo Chiau Beng, who best summed up the challenge posed by the new competitors from China, told Bloomberg News.
Kep Corp's previous more favourable payment terms have been impacted too.
20/80% or 10/90% payment term now???
Planting Sweet Cherry Tree.
How long does it take to harvest?