Restructuring yard’s private and state owners scrap over restart

China's bankrupt Qingdao Yangfan Shipbuilding is set to be revived as the prospect of foreign newbuilding orders improves, but its estranged former shareholders are now fighting for control of the yard in a politically tinged battle.

Majority shareholder Yangfan Group, part of Zhang Zhixiang's private Beijing Jianlong steel-making group, has creditors on its side after most of them voted in favour of a restructuring offer that could soon put Yangfan Group in sole control.

Pending approval by the Intermediate People's Court of Qingdao, Yangfan Group said it would contribute CNY 3.8bn ($600m) to a debt settlement plan to revive the facility. Yangfan Group acquired majority ownership of the formerly state-owned yard 10 years ago and expanded it in partnership with local government interests, until business ground to a halt.

Yangfan Group's other facilities in the Zhoushan Islands of Zhejiang province are wholly owned by Jianlong Group and were not directly affected by the Qingdao Yangfan collapse in 2016, although the group struggled to avoid damage to the Yangfan brand. Yangfan Group officials say their main Zhoushan facilities now have an orderbook of about 40 ships, including bulkers, small containerships and car carriers.

Meanwhile, unlike the creditors who have recently voted in favour of Yangfan Group's bid, former shipyard workers are campaigning on the side of the minority shareholder, the Huatong Group, which is owned by the Qingdao municipal government.

In a strongly worded "open letter to all of society" published through Chinese shipping website Dragon Ship (Longchuan), anonymous workers protest their treatment by Yangfan Group and Beijing Jianlong. They say they favour Huatong Group as a new owner because they believe government ownership offers more workplace security and also because that company's business plan looks more promising.

In an ominous note, the workers are pointing back to a violent incident in the modern industrial history of China and that of Jianlong Group.

In the "Tonghua Steel Incident" of July 2009, a state-owned steel mill that Jianlong Group was acquiring in northeastern Jilin province was the scene of a prolonged confrontation between labour, management and government officials. Fearing Jianlong Group's plans to downsize their huge workforce, workers chased down an executive named Chen Guojun and beat him to death.

The Tonghua Steel Incident remains well known in China and workers from the idled shipyard have found the analogy apt.

One group travelled from Qingdao to Beijing to picket Jianlong Group headquarters with banners reading, "Don't let the Tonghua Steel Incident happen all over again!", and "Jianlong, please leave Qingdao Shipyard alone! Give 500 staff a way to make a living!"

However, unnamed creditors cited by Dragon Ship suggested the employee protest was orchestrated by the Huatong Group side.

What is now known as Qingdao Yangfan was originally called Qingdao Shipyard until Yangfan Group took majority control in 2008 and expanded the facility. By 2016, the depressed shipbuilding market had led to cash flow problems, and workers, banks and suppliers went unpaid. The yard sought court protection and, late last year, TradeWinds reported that newbuilding work had ceased at Qingdao Yangfan.

A business issue in the dispute between the two former owning partners involves the Qingdao yard's unique position as a builder of both military and merchant vessels. Thanks to its history, Qingdao Yangfan is the only privately controlled yard in China with authorisation to build warships. TradeWinds understands this status continues despite the bankruptcy.

If Huatong Group took full control, workers said the business would focus more on military shipbuilding — a move they regarded as providing long-term job security.

On the other hand, Yangfan Group would aim for a greater share of foreign merchant newbuilding work.