Mitsubishi Heavy Industries is close to concluding talks to sell its main Koyagi shipyard, one of two yards it owns in Nagasaki prefecture.
The facility is going to neighbouring Oshima Shipbuilding.
No price has been declared for the deal, although a figure of around JPY 100m ($9.1m) has been reported as the selling price. Koyagi employs around 600 people, although it is unclear whether they will also move over to Oshima.
The Koyagi facility is one of Mitsubishi’s largest yards where it has built LNG carriers, Very Large Gas Carriers (VLGCs), VLCCs and passengerships in the past.
However, after months without new contracts, the orderbook at Koyagi has run down to the extent that it only has one ship on order, a 310,000-dwt VLCC for Navios. The order was subcontracted out to Mitsubishi by Imabari Shipbuilding.
The sell-off will add to speculation that Mitsubishi is effectively running down its shipbuilding business because it can no longer compete with Chinese and South Korean rivals in the market for LNG, VLGCs and VLCCs.
An ill-fated attempt to diversify into the cruise market five years ago, with a double cruiseship order from Aida Cruises, resulted in the yard running up more than $2bn in extraordinary losses.
Since then it has made several attempts to revive its shipbuilding business including setting up an alliance with Imabari Shipbuilding, Oshima Shipbuilding and Namura Shipbuilding. However, Imabari recently declared it is to partner up with compatriot Japan Marine United by taking a capital stake in the company.
Beset by problems
Mitsubishi is also under pressure from shareholders to improve profitability. Its flagship project, the the aircraft MRJ 70, has been beset by problems running up huge losses for the company.
The sale of Koyagi is bound to be taken as a sign of the further decline of Japanese shipbuilding. Mitsubishi Heavy Industries was once Japan’s largest and most technically advanced shipbuilder and in the 1990s was the world’s leading shipbuilder.
Oshima Shipbuilding focuses its business on the serial production of ultramax and kamsarmax bulk carriers.
Observers are keen to see if it will apply the same business model to the Koyagi shipyard or see it as an opportunity to diversify.
Mitsubishi is expected to make a statement on the sale of Koyagi next week.
