China Rongsheng wins first orders to build jack-up rigs in Singapore

Date: 25 Mar 2013

China Rongsheng Heavy Industries Group Holdings Ltd. (Rongshen) successfully garnered the right to build 2 jack-up rigs in Singapore. The orders are reportedly worth US$ 360m and this signals Rongsheng is making further progress in becoming an international player in rig engineering.

For many Chinese shipbuilders, these orders will inject a boost of confidence in the Chinese shipbuilding industry, for it experienced an industry slump last year with orders dropped by 50% in 2012. Rongsheng's inroad into the Singaporean ship building market is at the expense of local Singaporean builders.

For now, Rongsheng has obtained 2 contracts to build 1 CJ46 jack-up rig for exploratory drilling platform for oil and natural gas, with an option to further build another rig.

The new Singaporean orders mean Rongsheng's decision to venture overseas to counter the industry slump in China is paying off. In 2012, it obtained 1 order to build a deepwater tender barge and that order came with an option to build 3 more.

Industry insider observed that securing orders to build rigs is certainly a step-up from building tender barge and this further reflects Rongsheng's growing ability to diversify its service offerings.

However, these new orders to build rigs and tender barge may not necessarily translate into profits for Rongsheng overnight, because its transition from a traditional ship builder to other more sophisticated engineering on the sea would require some time to master and turn orders into profitable endeavors.

Rongsheng, who reported a possible net loss in 2012, now earns most of its revenue totaling RBM 5.5b (US$ 888.35m) for the 1st 2 quarters of 2012 from shipbuilding.

Rongsheng currently has the largest order books among Chinese builders focusing mainly on building Vale's large ore carriers.

The cash depleted Rongsheng, anticipated to announce its 2012 performance results on Tuesday, saw more than 80% of its share values disappeared in the last 2 years. But its share values have climbed up 6% thus far in 2013.

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