Australian shipbuilder Austal is exiting the Chinese shipbuilding sector, selling its 40% stake in Aulong Shipbuilding to joint venture partner Jianglong Shipbuilding.

Jianglong, which currently owns a 60% stake, will become the sole owner of Aulong once the deal has been concluded.

“A letter of intent has been executed by the parties targeting completion of the negotiations by 31 October 2021,” Austal said in a statement to the Australian exchange.

An Austal spokesperson told TradeWinds that the pull-out from the company's Aulong stake was not linked to ongoing diplomatic and trade tensions between Australia and China, which are at an all-time high.

He said the Chinese domestic ferry business had not grown like the company had envisaged five years ago when the joint venture was first established.

The shipyard was formed in June 2016 with the aim of pursuing commercial passenger and non-military shipbuilding opportunities in China.

“Austal’s focus is moving into steel shipbuilding in the US and growing our defence and commercial business in South East Asia, so we can’t give the Aulong joint venture the attention and capital it needs to grow,” the company spokesperson said.

Austal highlighted it has licensed commercial aluminium vessel designs for marketing throughout China and construction at Jianglong Shipbuilding’s established facilities.

“Jianglong Shipbuilding brings local shipbuilding infrastructure, experience and expertise, with close to 1,000 employees across two shipyards supporting the joint venture,” it said.

Jianglong Shipbuilding, like Austal, builds specialised small craft such as fast ferries, research vessels and workboat, along with naval patrol vessels.

After divesting itself of its Aulong stake, Austal will focus on its shipyard facilities in Australia, the US, the Philippines and Vietnam.

In February, Austal reported its orderbook stood at AUD 2.9bn ($2.25bn), with 38 ships scheduled or under construction, the bulk of which are for the defence sector.

This was followed up in March with an announcement that Austal USA had been awarded a $235m contract from the US Navy for the detailed design and construction of a new class of expeditionary fast transport vessels.