Covid-related restriction in China have disrupted Yangzijiang Shipbuilding (Holdings)‘s shipyard operations, but all shipyards are running at full utilization, the Chinese shipbuilder said Friday.
“All shipyards of the group are running at full utilization rate. The group reactivated the Changbo shipyard in 2021 to increase shipbuilding capacity and it can deliver an additional six to eight small to mid-sized vessels in a year,” Yangzijiang Shipbuilding said in a filing to SGX with answers to shareholders’ questions before the annual general meeting (AGM).
“The group remains on track to meet its delivery schedule for 1H2022. The group will continue to monitor the situation closely to prevent disruptions to our delivery schedule and maintain constant communication with our customers to keep them updated on the delivery of vessels,” the shipbuilder added.
Yangzijiang Shipbuilding noted that Covid-related restrictions have caused disruptions to operations, citing mobility restrictions and quarantine periods for inter-city travel. The restrictions mean workers must remain within the same city, and the company has made arrangements for workers to stay in hostels or at the shipyards, the filing said.
The restrictions have also impacted the transport of raw materials, the filing said.
Rising raw material costs
When asked about rising raw material costs — which caused the 2021 gross profit margin for the shipbuilding business to fall to 12 percent from 21 percent in 2020 — Yangzijiang Shipbuilding said higher steel prices were the main culprit.
Commodity prices globally have risen sharply in recent months amid supply chain disruptions caused by the Covid-19 pandemic and Russia’s war on Ukraine.
The shipbuilder said there were no instruments for hedging its steel costs in China, with steel purchases made three to six months before vessel construction.
But it added that most of the orderbook was denominated in U.S. dollars, and the company hedges around 40 percent of its U.S. dollar exposure. Yangzijiang Shipbuilding also note it has a natural U.S. dollar hedge for around 20 percent of contract values as key machinery parts are priced in U.S. dollars.
No net-zero goal
In answer to a separate question, Yangzijiang Shipbuilding said it has not set a net-zero target for reducing its greenhouse gas emissions (GHG), but it was promoting greater sustainability.
The shipbuilder is increasing its research and development investments in China and overseas, including planning a maritime R&D center in Singapore, with a focus on green-vessel technologies.