Yangzijiang turns to menial shipbuilding jobs as high-value orders disappear

Building margins are now well below average.

Yanzijiang shipbuilding is turning to low-margin jobs as high-value orders vanish, according to a report by CIMB.

CIMB noted that the group's second-quarter core shipbuilding margin was 15%, down from 21% in the previous quarter.

"High-value contracts have been exhausted and YZJ is in the phase of executing lower-margin jobs," the report noted.

The report said that including trading, blended shipbuilding GP margin was 11%, down from the historical 19-20%.

"YZJ is sacrificing margin to win orders. Current new orders are secured at 10% GP margin vs. the historical average of 20%. Although order momentum could pick up in 3Q15 to hit the order target of US$2bn, the overall outlook is challenging with stiff competition from Korean and Japanese yards," said CIMB.