China’s 2 largest shipyards plan to merge to create the world’s biggest builder

China’s two biggest shipyards, which count the People’s Liberation Army Navy among their customers, are set to merge their resources to heed the government’s instruction to streamline their operations, strengthen management and accelerate the industry development.

Both listed shipyards are subsidiaries of China State Shipbuilding Corp, the world’s largest shipbuilding conglomerate with one-third of the global market based on shipbuilding orders.

The impending merger will create a shipyard with combined annual sales of 122 billion yuan (US$17.1 billion/HK$133.1 billion), almost double the size of South Korea’s Hyundai Heavy Industries. The merged entity would be capable of building a variety of vessels, from warships like aircraft carriers to commercial ships like container carriers, very large crude carriers and even passenger liners.

“A consolidation will help optimise their business structure with strengthened capability to take orders for more advanced vessels,” Man Zaipeng, an analyst at Sinolink Securities, said in a note to clients. China’s increasing share of the global shipbuilding market “bodes well for earnings of the new entity,” he added.