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Our reporter Fang Chao and Shi Yingjing reported from Shanghai

The curtain has been raised on the “shipbuilding fever”, and the latest entrant is the richest man in Jiangsu.

On July 7, Hengli Group signed a relevant agreement with Dalian, Liaoning. According to the agreement, Hengli Group will invest an additional 9.2 billion yuan to build the Hengli Heavy Industry (Dalian Changxing Island) Industrial Park, which is expected to have an annual construction capacity of 7.1 million deadweight tons. If this data is followed, it will rank among the world's top shipbuilders.

Just two days later, on July 9, Hengli Group invested another 2 billion yuan to build the Hengli Heavy Industry (Dalian Changxing Island) supporting industrial park in Dalian, Liaoning. In just a few days, Hengli Group spent 11.2 billion yuan in Dalian alone. There is no doubt that behind the investment of over 10 billion yuan, Hengli Group, led by Jiangsu's richest man Chen Jianhua and his wife Fan Hongwei, is stirring up waves in the global shipbuilding industry.

（7moon9In the afternoon of the same day, the Hengli Heavy Industry (Dalian Changxing Island) supporting industrial park project was signed. (Image source: Changxing Island News)

Behind Hengli Group's entry into the shipbuilding field, the shipbuilding market is entering a highly active period. At present, many domestic shipyards have scheduled orders until 2028. Clarksons data shows that as of the end of June, the Clarksons New Ship Price Index recorded 187, up 5% from the beginning of the year. In terms of nominal prices, it is close to the same level in 2008.

"There will be no problem for this round of 'shipbuilding boom' to continue for 5-10 years," a shipping industry analyst told a reporter from China Business News. Under the influence of multiple factors such as the elimination of old ships, decarbonization of the shipping industry, and rising geopolitical risks, the heat of the shipping industry has continued to rise since 2021. However, he also reminded that the global financial crisis in 2008 led to overcapacity in shipbuilding, "shipyards have closed down on a large scale and many have gone bankrupt. This history should not repeat itself, but investors should still be cautious about the expansion of industry capacity."

“Resurrection” of the largest foreign-funded shipbuilding project

The Jiangsu richest man's big move of bidding for the assets of the largest foreign-funded shipyard and investing over 10 billion yuan to increase shipbuilding has attracted widespread attention from the outside world.

According to the official website of Hengli Group, it was founded in 1994. It is an international enterprise developing the entire industrial chain of oil refining, petrochemicals, polyester new materials and textiles. It currently owns one of the world's largest PTA factories, one of the world's largest functional fiber production bases and weaving companies, with 170,000 employees. Its total revenue in 2023 was 817.7 billion yuan, and it is currently ranked 123rd among the Fortune Global 500.

At the helm of this private petrochemical giant are Chen Jianhua and Fan Hongwei, who have repeatedly become the richest people in Jiangsu. The "2021 Hurun Global Rich List" released by the Hurun Research Institute shows that Chen Jianhua and Fan Hongwei ranked 36th in the world with a wealth of 260 billion yuan, becoming the latest richest people in Jiangsu, and in 2022, they retained the title of the richest people in Jiangsu.

In recent years, Chen Jianhua and Fan Hongwei have turned their attention to the shipbuilding field and have continued to increase their investment.

Back in July 2022, Hengli Group spent 2.11 billion yuan to successfully acquire STX (Dalian) assets. This project was once the largest foreign-funded shipyard in China. Public reports show that South Korea's STX Group was once the world's fourth largest shipbuilding company. Since 2006, STX has invested 3 billion US dollars in the Dalian Changxing Island Port Industrial Zone to build the "China Dalian STX Shipbuilding Offshore Base."

However, the South Korean STX Group, which started out by mergers and acquisitions, suffered setbacks in its Dalian project due to the 2008 global financial crisis and the downturn in the shipbuilding industry. "Since 2013, STX Dalian has been in a state of suspension and semi-suspension until it was completely shut down," this newspaper quoted a local insider in Dalian as saying that the project "began to owe taxes in 2013, and by 2014, the total amount of taxes owed was 120 million yuan."

The STX (Dalian) project, which had been idle for many years and had been auctioned many times but failed, was not taken over by Hengli Group until 2022. Hengli Group's bidding for the STX (Dalian) project may be closely related to its many years of development experience in the local area. "According to Chen Jianhua, chairman of Hengli Group, in order to revitalize STX Dalian assets, the Dalian Municipal Party Committee and Municipal Government have repeatedly extended olive branches to it." People's Daily client reported recently.

Why did Hengli Group choose to “take over” a shipyard project that had been suspended for ten years?

"Chen Jianhua finally decided to accept this 'cross-border challenge': 'The shipbuilding business will support Hengli's transportation of crude oil, coal and finished products; the adjacent Hengli (Dalian) Petrochemical Industrial Park, the gases that should have been directly emitted can be used as a continuous, stable and low-cost production momentum in the heavy industry.'" People's Daily client reported.

Hengli Group seems to have made sufficient preparations for bidding for the STX (Dalian) project. The reporter noticed that Hengli Heavy Industry Group Co., Ltd. had been registered and established before bidding for the above project. According to Qichacha, the company was registered and established in Dalian Changxing Island Economic Zone on July 1, 2022. Not only that, China Shipbuilding News previously reported that "Hengli Heavy Industry also used the revitalization of existing assets as a breakthrough point to increase investment by 18 billion yuan."

"Utilizing existing idle production capacity is undoubtedly the fastest way to enter the shipbuilding industry," the above-mentioned ship industry analyst told reporters regarding Hengli Group's "taking over" of the idle STX (Dalian) project. "Because new ship production capacity requires various approvals, and shoreline resources are also very tight now, if there is idle production capacity or the choice is to reorganize an old shipyard, it will be faster to 'get started'."

Can it break into the “first echelon” of shipbuilding?

Although it has only been two years since it entered the shipbuilding field, Hengli Group, a newcomer in the industry, has great ambitions - to "enter the 'first echelon' of the global shipbuilding industry."

"'Either don't do it, or do it the best,' Chairman Chen Jianhua said. Hengli Heavy Industries is currently going all out to advance into the 'first echelon' of the global shipbuilding industry, and will build quality ships with the highest standards, most stringent requirements and fastest speed." On July 4, an article on Hengli Group's official Weibo account described it this way.

Public information shows that according to the relevant agreement signed between Hengli Group and Dalian on July 7, Hengli Heavy Industry (Dalian Changxing Island) Industrial Park is expected to have an annual steel processing capacity of 1.8 million tons and an annual output of 7.1 million deadweight tons.

The reporter noted that if Hengli Group achieves an annual construction capacity of 7.1 million deadweight tons as planned, it will become a world-class shipyard. A comparable case is China's largest private shipbuilding group, Yangzijiang Shipbuilding, which ranks among the top ten shipbuilding groups in the world. Public data shows that in 2023, Yangzijiang Shipbuilding will deliver more than 60 new ships with a total tonnage of more than 5 million deadweight tons.

What has aroused public attention is that, with multiple challenges such as a short time in the shipbuilding industry and high technical barriers to shipbuilding, how can Hengli Group, a cross-border player, advance into the "first echelon of the global shipbuilding industry"? The reporter sorted out public information and found that Hengli Group seemed to have made a series of arrangements for shipbuilding by "forming alliances" in the fields of senior personnel and technology development.

For example, in the field of personnel, more than half a year after entering the shipbuilding field, Hengli Group's shipbuilding sector welcomed the joining of senior executives from Yangtze River Shipbuilding. In February 2023, it was reported that Zhang Tao, a former senior executive of Yangtze River Shipbuilding, had joined Hengli Heavy Industry as deputy general manager. According to relevant reports, Zhang Tao said that "the focus of work after joining Hengli Heavy Industry is mainly in the direction of marketing" and "in the future, we will work hard to win more orders for the new company."

As a technology-intensive industry, the high value-added shipbuilding sector is highly competitive, but Hengli Group is seeking to impact this sector. Public information shows that Hengli Heavy Industry (Dalian Changxing Island) Industrial Park, invested by Hengli Group, will further expand its high value-added green ships and high-end offshore equipment manufacturing business such as ultra-large oil tankers, ultra-large liquefied gas carriers, and ultra-large container ships in the future, and build a modern, intelligent, and green first-class ship and offshore equipment manufacturing industrial base.

The reporter noticed that the very large crude carriers (VLCCs), very large liquefied gas carriers (VLGCs), and very large container ships planned by Hengli Group are all high-tech, high-difficulty, and high-value-added ship types, and the competition among Chinese and Korean shipbuilders in the above-mentioned fields is quite fierce.

Information provided to reporters by Clarksons shows that from 2019 to the present, Chinese shipbuilding companies have received a total of 60 VLCC orders and 25 VLGC orders. In these high value-added ship fields, state-owned shipbuilding companies such as Dalian Shipyard Group, Waigaoqiao Shipyard, and Jiangnan Shipyard have obvious advantages.

With high technological barriers and fierce market competition, Hengli Group, which is striving to become the "first echelon of the global shipbuilding industry", chose to "join hands" with international giants. In April this year, Chen Jianhua led a Hengli delegation to South Korea, and visited Hyundai Heavy Industries Co., Ltd. and Samsung Heavy Industries Co., Ltd. (hereinafter referred to as "Samsung Heavy Industries") for inspection and study.

Taking Samsung Heavy Industries as an example, on May 15, 2023, Hengli Shipbuilding (Dalian) Co., Ltd., a subsidiary of Hengli Heavy Industries, and Samsung Heavy Industries of South Korea held a groundbreaking ceremony for the "15,000 TEU container ship TERA section construction project" at the Hengli Heavy Industries Industrial Park. Hengli Heavy Industries once said that the start of the project "marks that Hengli Heavy Industries has officially entered the field of large international container ship construction."

According to information previously released by Hengli Group, during Chen Jianhua's inspection of Samsung Heavy Industries in April 2024, Choi Sung-an, vice chairman of Samsung Heavy Industries, said: "Samsung Heavy Industries is willing to provide technical support and intellectual guarantee for the future development of Hengli Heavy Industries."

In addition, in the important engine field, in July 2023, Hengli Heavy Industry's Hengli Engine (Dalian) Co., Ltd. and MAN Energy Solutions Group held a signing ceremony for a patent licensing agreement. Hengli Heavy Industry previously stated: "The acquisition of MAN Energy Solutions' marine low-speed engine patent license marks the official launch of Hengli's engine manufacturing business."

With multiple measures, Hengli Group's ship orders have increased. According to public reports, according to Clarksons data, Hengli Heavy Industry has a total of 66 orders with a total deadweight tonnage of 8.31 million tons. However, the number of bulk carriers is as high as 56, while the number of VLCCs with higher technical barriers and higher added value is 4, and the number of very large ore carriers (VLOCs) is 6.

Yuanda Securities Research Report previously believed that the "increased concentration in the shipbuilding industry reflects the development trend of the global shipbuilding industry and indicates that competition will become more intense in the future" and "for China's shipbuilding industry, maintaining technological innovation, improving production efficiency and meeting market demand will be the key to maintaining and enhancing market position."

The reporter previously wrote to Hengli Group regarding issues such as cross-border entry into the shipbuilding field and how to overcome technical difficulties in high-value, high-tech ships such as VLCC and VLGC, but no reply was received as of press time.

(Editor: Shi Yingjing Reviewer: Tong Haihua Proofreader: Zhang Guogang)