YUEQING, China — A shipbuilding boom raised the fortunes of this industrial port in China. Five-star hotels sprouted along with machinery depots and metal shops. European luxury cars darted past heavy trucks on the bustling streets.
But in another sign of Chinas economic slowdown, shipyards are now closing and half-finished vessels lie rusting in the humid haze. Prosperity is receding like the tide.
Thousands of laborers have lost their jobs. Liu Danyin, a compact man with bulging forearms, found so much work in the regions shipyards over the past decade that he built a new home for his family hundreds of miles away in the countryside. Then he was laid off suddenly last year.
Many companies collapsed, said Liu, 48, who recently took a lower-paying job building a sea bridge. There used to be so much energy and life here. Now they dont build ships anymore.
The hard times that have befallen Yueqing, a county in the eastern province of Zhejiang, are playing out at shipbuilding bases across China, from the northern port of Qingdao to the silt-filled Yangtze River in the central heartlands.
The bellwether industrys troubles have their roots in a shipping boom that started a decade ago. Global investors rushed to finance new vessels needed to haul coal and copper to Chinas humming factories and to transport finished electronics, toys and other exports out. China went from producing just over 100 vessels in 2002 to more than 1,000 in 2010, according to Worldyards, a Singaporean-based shipping industry research firm.
That over-exuberance resulted in a glut of ships. Its a problem that has worsened as Chinas economy has decelerated along with that of its major trading partners Europe and the United States. Fewer customers for Chinese exports and a shrinking appetite at home for raw materials mean fewer vessels needed to carry that cargo.
Ship values have plummeted, and many owners now owe more on their loans than their boats are worth. And all that capacity is putting downward pressure on shipping rates as Chinese transport companies seek new markets abroad to keep their vessels working.
The building binge was overwhelming, said Ralph Leszczynski, the Beijing-based head of research at ship broker Banchero Costa & Co.
People earned so much money they didnt know what to do with it. The Chinese started opening shipyards every day. But it created a bubble. Now everyone is paying for the hangover.
Shipbuilding is typically a cyclical industry nagged by overcapacity every few years. But experts say this trough is being prolonged by the scope of Chinas seafaring expansion.
Under central government guidance, China poured money into developing its shipbuilding and maritime logistics sectors, deeming them crucial for the nations development.
China is home to six of the worlds 10 busiest ports, including Shanghai, which is No. 1. The state-owned China Ocean Shipping Co. operates the globes largest fleet of bulk carriers and fifth-largest fleet of container ships. China also dominates the manufacturing of cargo containers.
And it has edged out South Korea to become the worlds largest shipbuilder. China commands nearly half the globes market share for shipbuilding more than five times the share it held 10 years ago, according to Worldyards.
China said this year that it aimed to nearly double its annual ship sales to $190 billion by 2015. The plan also calls for industrywide consolidation that will benefit big government-owned players such as China State Shipbuilding Corp. and China Shipbuilding Industry Corp., which combined to produce about one-third of the nations shipping output last year.
With shipbuilding, it is fair to say that China has been obsessed with maintaining or increasing its market share, even if the result is that there are too many ships chasing too few cargoes, said Simon Bennett, a spokesman for the London-based International Chamber of Shipping.
But Chinas growth has hit a wall.
The China Association of the National Shipbuilding Industry reported Chinese ship orders declined 47 percent to 9.54 million deadweight tons the first five months of this year from the same period last year.
Meanwhile, ship exports slumped 48 percent from a year ago to 6.84 million deadweight tons (a measure of the maximum weight a ship can carry).