The Maritime Industry. Shared interests unite China and Norway

Transcription

1 MEMBER MAGAZINE FOR THE NORWEGIAN CHAMBERS OF COMMERCE IN BEIJING, SHANGHAI, HONG KONG, AND OSLO ISSUE 2 / 2015 The Maritime Industry Shared interests unite China and Norway

2 The law firm connecting Norway and China Wikborg Rein s capital markets team offers in-depth knowledge and considerable experience across all areas of stock exchange listings, securities offerings, debt offerings and acquisitions of listed companies, as well as advisory services within the area of financial regulation and securities law. We advise and assist a broad range of clients including Norwegian and international companies, investment firms, financial institutions, funds and investors with transactions and advisory services within the securities law and financial regulatory area. Shanghai Tormod L. Nilsen tln@wrco.com.cn Yafeng Sun yfs@wrco.com.cn Oslo Dag Erik Rasmussen der@wr.no Per Anders Sæhle pas@wr.no

3 >CONTENTS 4 EDITORIAL Editors Chris Rynning and Geir Sviggum overview this issue of Norwegian Links 5 SPOTLIGHT A close look at the Norway-Asia Business Summit in New Dehli 8 CHINA ECONOMICS DNB provides a comprehensive analysis of the dry bulk shipping market 9 COVER STORY Sjøfartsdirektoratet s Senior Advisor Steinar Haugberg chimes in on the Norwegian maritime industry 11 INNOVATION NORWAY Ivar Moesmann of Innovation Norway provides insight on the state of the offshore sector 13 CHINA LEGAL Wikborg Rein forecasts investments in the shipping and offshore sector 15 KNOWLEDGE Professor Torger Reve of BI examines the effect of oil price fluctuations on the maritime industry 17 INSIGHT An in-depth look inside Statoil s Beijing office 19 EXCLUSIVE Infima s Johannes Neteland gauges the future of Chinese shipbuilding 21 BEIJING CHAMBER Norwegian Business Association 22 SHANGHAI CHAMBER Norwegian Business Association 23 HONG KONG CHAMBER Norwegian Chamber of Commerce Hong Kong 24 NORWAY CHAMBER Norwegian Chinese Chamber of Commerce 25 PERSPECTIVES Editor and Staur Partner Chris Rynning evaluates the state of the Chinese stock market 15 KNOWLEDGE 8 CHINA ECONOMICS 9 COVER STORY EXCLUSIVE INSIGHT ISSUE 2/2015 NORWEGIAN LINKS 3

4 >EDITORIAL Norwegian Chinese Chamber of Commerce PO. Box 54 Sentrum, 0101 Oslo Tel.: Norwegian Business Association Shanghai Royal Norwegian Consulate General Rm. 1701, Bund Center, No. 222 East Yan an Road, Huangpu District, Shanghai Tel: Fax: Geir Sviggum Chris Rynning Norwegian Chamber of Commerce Hong Kong Rooms , West Tower, Shun Tak Centre, Connaught Road Central, Central, Hong Kong. Tel: Fax: Norwegian Business Association Beijing Royal Norwegian Embassy 1, Dong Yi Jie, San Li Tun Beijing , P.R. China Tel: Fax: For contributions and advertising, please contact Norwegian Links at Publisher Leyton Trade Group Ltd Joint Editors Chris Rynning and Geir Sviggum Design, layout and prepress production Bamboo Business Communications Art director Johnny Chan Maritime Matters Norway s offshore fleet is the second largest in the world and considered to be the leader in competence, innovation and technology. Every day, around 50,000 merchant ships transport every kind of cargo internationally and several thousand oil rigs, support and supply vessels are engaged in exploration and drilling for oil and gas in every corner of the globe. Leaving aside historical parallels as seafaring nations, Norway and China are united in the need for a strong, fair, and sustainable maritime development. This issue of Norwegian Links highlights some of the key issues and players in the maritime sector. For example, Jotun is a global company you will know from its internationally recognized decorative paint business. You may however not know that Jotun also is a technology and product leader in coatings for vessels, pipelines, and offshore structures. Jotun s achievements were recognized by the Norwegian Business Associations across Asia earlier this year in awarding Jotun the Norway Asia Business Award. Mergers and acquisitions are heating up with Chinese conglomerates showing interest in the Norwegian maritime sector, as reported by Wikborg Rein and Infima whom both follow the capital markets closely. The Norwegian Maritime Authority is a key contributor in this issue, a government body with jurisdiction over ships registered in Norway and foreign ships arriving Norwegian ports. The Authority works with supervision and programs ensuring high-quality attitudes among sailors and shipping companies to ensure safe and eco-friendly ships. They lead the way in coherent, quality focused and accessible legislation. This issue also includes contributions from DNB, the leading financier of the maritime industry. BI is a leading educator of talent to the industry and Statoil is one of the largest single operators in the sector. Rounding up this issue is Innovation Norway, a tireless catalyst for innovation and entrepreneurship across the maritime value chain. What a lineup of contributors to make this issue enjoyable for you. Enjoy! GEIR SVIGGUM, Joint Editor / CHRIS RYNNING, Joint Editor 4 NORWEGIAN LINKS ISSUE 2/2015

5 SPOTLIGHT Jotun Wins the 2015 Norway-Asia Business Award at the Norway-Asia Business Summit in New Delhi The Norway-Asia Business Award (NABA) is the highest recognition presented by the Norwegian Business Associations in Asia to a company that has distinguished itself through growth and innovation. After a tough nomination and selection process, Jotun was the runaway winner with Norway s Minister for European Affairs, Mr. Vidar Helgesen, awarding the prize to Jotun s Vice President of North East Asia, Mr. Erik Aaberg, at the summit in New Delhi. The summit covered key economic and political trends with discussions flavored both by falling oil prices and predicted Indian economic growth. Minister Helgesen and State Secretary, Mr. Morten Høglund, represented the Norwegian Government, alongside the Head of the Confederation of Norwegian Enterprise (NHO), Ms. Kristin Skogen Lund. No less than 11 Ambassadors from Asia attended the event, as well as a variety of Indian and international speakers. However, the inauguration of the conference by Nobel Peace Prize Laureate Kailash Satyarthi was the undisputed highlight of the conference. India s GDP growth is expected to overtake China s GDP growth this year, although its economic size in absolute terms is lacking far behind China s. Nevertheless, there was a feeling of optimism and excitement throughout the conference related to a new growth era in India, and Jotun is one of a few companies well positioned to take advantage of the expected growth. Next year s NBA summit is expected to be held in Singapore. ISSUE 2/2015 NORWEGIAN LINKS 5

6 PIECES The Norwegian shipping fleet is the most modern in the world Norway has 0.07% of global population, yet 6% of the global fleet in terms of value The average ship in the Norwegian fleet is 11 years old The maritime industry is Norway s most important export industry after oil and gas 175 billion NOK is created every year by the maritime industry, and 100 billion of that is wages 110,000 Norwegians are directly employed in the maritime industry Nearly 50% of all business in Norwegian coastal communities is related to the maritime industry Norway has been a major player in shipping for over 150 years Photo: Heidi Widerøe/Innovation Norway Norwegian shipping companies have a strong position in specialized shipping, including transport of petroleum products, chemicals, gas and vehicles The Norwegian maritime cluster is at the forefront of innovative solutions, including use of alternative energies 6 NORWEGIAN LINKS ISSUE 2/2015

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8 CHINA ECONOMICS Will the Dry Bulk Market Recover? By Nicolay Dyvik, Head of DNB Equity Research Øyvind Berle, PhD, Shipping Equity Analyst Petter Haugen, Shipping Equity Analyst For over a decade, Chinese demand for raw materials and energy created profitability in most shipping segments, reaching an all-time high in the period from 2005 to Over the past couple of years, economic growth in China has declined, making some shipping segments suffer, most noticeably dry bulk shipping. With the spot rates at an all-time low, the DNB equity research team planned its annual Asia trip with the intention of finding out whether there are alternative demand drivers for seaborne transportation demand than growing Chinese imports. After spending a week in China and India, we firmly believe it is not a matter of if the dry bulk space will recover, but when. But its saviour is probably not China. China s WTO membership from 2001 onwards added almost one billion people to the global work force. With the productivity growth following its entry to the global scene, the demand for more or less all raw materials skyrocketed. This resulted in appreciating oil, gas, coal and iron ore prices, which again made the willingness to pay for transportation services, i.e. shipping rates, reach levels never seen before. For example, in 2001 the day-rate for Capesize vessels (the largest dry bulk vessel class, about 200,000 tonnes of carrying capacity) was $13,000 USD / day, while in May 2008 it peaked at $201,000 USD /day. However, this tremendous growth also made vessel owners believe that there was an almost endless demand for new vessels. Compared to 2001, the dry bulk fleet is now 175% larger, while the crude oil fleet has grown 73%. And there are still 2,000 dry bulk vessels in the order-book, which will increase the current fleet size by another 23%. In 2014, the first signs of weakening in the Chinese import of dry bulk commodities started to emerge. In all three months from February to April in 2014, Chinese coal imports showed a decline compared with same months in 2013, and during the first quarter of % less coal was imported compared with Q There are probably more reasons for this decline than merely an overall weakening of economic growth, but the impact on dry bulk earnings has nevertheless resulted in rates that no longer cover the cost of day-to-day operation of the vessels: spot rates for a Capesize vessel during the first five months of 2015 is $4,300 USD /day, significantly below the cost of operation, which is about $5,000 - $7,000 USD /day. With this in mind, we talked to both Chinese and Indian companies about their expectations for the dry bulk trade going forward. We left China with the impression that future imports to China should grow much slower, but still not decline substantially from current levels. The latter is important as China imports about 40% of the global trade in dry bulk commodities. Specifically, most companies anticipated rather steady coal imports while iron ore imports were still expected to grow, although slower than in recent years. We left India with a much more upbeat impression. In more or less all of our meetings we heard the Make in India slogan resonate with enthusiasm. Make in India is an initiative of the Modi government to encourage companies to manufacture their products in India; i.e. India will focus more on growth in manufacturing, at the expense of consumption-oriented growth, quite similar to what China did in the past decade, but contrary to Chinese current policies aiming for a higher ratio of consumption in its total production. With the combination of a more growth-oriented focus and its large population of 1.2 billion people, similar in size to China but significantly younger, India is likely to be a pivotal force for the global economy in general, and to the trade in dry bulk commodities in particular in the years to come. Hence, it seems too bearish to believe that the dry bulk trade has peaked. The DNB Shipping Equity research team still believes it is only a matter of time before this market can once again prosper. 8 NORWEGIAN LINKS ISSUE 2/2015

9 COVERSTORY With its long maritime history, Norway is in a position today unlike any other nation: a complete maritime cluster encompassing shipping companies, shipyards, equipment suppliers, financial services, classification giant DNV-GL, research institutions like MARINTEK, the highly competent Norwegian Maritime Authority, and more. The Norwegian maritime industry has for years been a world leader in adopting and developing new maritime technology, both above and below water. Norway has been at the forefront of developing greener technologies, such as better hull designs as well as LNG-fueled and battery powered vessels. Innovation is what we do every day. The Norwegian Maritime Authority (NMA) is a natural partner for the maritime cluster in the development of superior and greener technologies for the seafaring sector. We work on a national level to ensure that new initiatives are safe and reliable for the crew, cargo, and passengers. The close interaction between our maritime cluster and the NMA is vital in ensuring a quality stamp on both our products and our maritime administration. It is vital for us to utilize our experience in cutting-edge technology on an international level, exercising our influence in the International Maritime Organization (IMO) to cultivate initiatives that we believe will make international shipping safer, environmentally sounder, and at the same time more profitable. These goals are not contradictory. A recent study among Norwegian ship-owners indicates that stricter environmental regulations on shipping are in fact a driver of growth and competitive advantages in shipping, and not a barrier. So what s in it for China? The world s first battery-powered car ferry entered regular service this past winter, crossing one of Norway s countless fjords solely on electricity. With China poised on the edge of a renewable power revolution, environmental concerns seem to weigh heavily on the country s agenda. The environmental potential of both LNG and battery power is enormous if applied to vessels crossing and following the inland waterways, and even greater if extended to coastal shipping. We believe that a close partnership between competent maritime authorities and the maritime industry is beneficial to all parties. This works in Norway. Sharing the best legislative practices makes sense to us. Our entire maritime cluster is ready to market their considerable expertise and technology worldwide. For China, the opportunities are enormous. Norway: The Full-Scale Maritime Provider By Steinar Haugberg Senior Advisor, Sjøfartsdirektoratet ISSUE 2/2015 NORWEGIAN LINKS 9

10 DNB has served the maritime and shipping industries worldwide for more than 50 years. We are present where our customers are - in Oslo, Bergen, London, New York, Shanghai, Singapore and Athens. The maritime industry is crucial for global trade and fundamental to a modern economy. Our shipping and logistics clients connect the world. Our offshore clients find energy to power it. For more information, please visit dnb.no. Banking the Norwegian way

11 The Current State of the Offshore Sector INNOVATION NORWAY By Ivar Moesman Market Advisor, Innovation Norway Innovation Norway has recently teamed up with Clarkson Research Services to conduct extensive research on the current state of the Chinese offshore sector with the goal of extracting key insights for the benefit of the Norwegian offshore industry. The full report is available upon request for Norwegian companies at Innovation Norway s Shanghai office. This article describes some of the findings. Chinese Offshore Shipyards and Fabricators: China has only become a major builder of offshore units in the last decade. Before 2000, the majority of Chinesebuilt offshore structures were ocean-going tugs and small transportation vessels ordered by Chinese domestic owners. Today, China is the single largest constructor of offshore vessels and structures, and receives approximately 40% of all global offshore contracts. Our future demand scenario suggests that Chinese yards are likely to maintain a share of around 40% of offshore contracts in volume over the next decade, though the units produced are likely to be more diverse and there will be a greater proportion of higher-spec support vessels and drilling units. Chinese Offshore Ship Owners: On the offshore ship owners side, we expect to see an increase in orders from Chinese owners in the construction sector, owing in part to the substantial works that will be required on aging fixed platforms in Bohai Bay. Furthermore, we see that the support vessel sector will continue to account for the majority of demand from Chinese owners, though upsizing trends are expected. Additionally, it is expected that Chinese owners will continue to invest in the offshore sector despite its huge investment and relative inexperience of Chinese national oil companies in the offshore space. Maritime Equipment Suppliers: Given that the Chinese government has announced ambitious goals in improving the amount of domestic-built machinery used in the offshore oil and gas industry, and considering that Norwegian companies are more well established in select areas of equipment supply than others, it seems sensible for Norwegian suppliers to seek consolidation. Subsequently, Norwegian suppliers can expand their position in the areas in which they already enjoy provenance rather than aiming to branch out into areas where non-norwegian firms predominate today. Furthermore, it is essential that Norwegian firms take a proactive approach if they wish to entrench their position in the Chinese market. Recommendations from the Chinese Offshore Industry: Despite the fact that the Norwegian Maritime Industry enjoys an exceptional reputation in China overall, Chinese yards and their owners have proposed recommended actions* for Norwegian companies in the offshore sector in a recent survey, including: Establish production facilities in China, and not merely sales offices Explore opportunities for joint ventures Maintain a strong emphasis on research & development Increase the degree of localization by adapting to Chinese culture and market demand with local elements and better services Consider methods of reducing costs to stay competitive and attractive to Chinese shipyards * These actions are based in large part on recommendations made by Chinese owners and yards/fabricators who participated in the survey, and they may involve risks, such as technology transfer, which may dissuade Norwegian equipment suppliers from pursuing these options. ISSUE 2/2015 NORWEGIAN LINKS 11

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13 CHINA LEGAL Chinese Investors Appetite for Shipping and Offshore By Tormod Ludvik Nilsen Partner, Wikborg Rein Shipping and offshore are industries of strategic importance to China just as they are to Norway. This will bring these two great nations together in business. Rough Waters The dramatic fall in oil prices, to whatever cause it is attributed, has had an immediate effect on the investment decisions currently being taken by the oil majors and national oil companies relating to offshore exploration and production. The first response of the market has been to take stock and, where possible, to defer decisions until the longterm outlook becomes clearer. This has a substantial impact on key players in the industry, and amongst them, many are Norwegian and Chinese, including shipyards and suppliers to the shipbuilding industry, as well as owners and charterers. Long-Term Positioning But one thing is for certain: China will continue to develop and grow her shipping and offshore industry. This is why China in addition to Norway will be the second country in which Wikborg Rein will have two offices: one in Shanghai, where we have been since 2002, and now one in Beijing. Long-term positioning is important. Many Norwegian companies have not fully grasped the high speed development we are witnessing in China, and too few companies have looked into what China and Asia may actually mean for their business in the future. Have you really taken-in what it means to your business that the soon to-be largest economy in the world is China? The three largest Norwegian companies in China Jotun, DNV GL, and Kongsberg Maritime are suppliers to the shipping and offshore industry. It is the same for Denmark. We expect to see an increasing number of Norwegian companies entering into partnerships, technology transfer agreements, joint ventures (for transfer of technology), and other ways of cooperation in the shipping and offshore industry in China going forward. Chinese Investments We are also confident that we will see an increasing number of strategic mergers and acquisitions by Chinese participants in the Norwegian maritime sector. Such investments are not only driven by return of capital, but also by a desire to have unrestricted access to the world s leading knowledge and technology in the industry for export to China. Norway is at the forefront in technology, but we are not the only nation. To be successful, we need also be the frontrunners in understanding the markets. ISSUE 2/2015 NORWEGIAN LINKS 13

14 Photo: Manfred Jarisch Our company Statoil is an international energy company with operations in 34 countries. Building on 40 years of experience from oil and gas production on the Norwegian continental shelf, we are committed to accommodating the world's energy needs in a responsible manner, applying technology and creating innovative business solutions. We are headquartered in Stavanger, Norway with approx. 23,000 employees worldwide, and are listed on the New York and Oslo stock exchanges. Statoil China 28th Floor, West Tower Twin Towers, B12 Jianwai Ave, Chaoyang District Beijing P.R China

15 KNOWLEDGE Norwegian Maritime Industry in Transition By Professor Torger Reve, BI Norwegian Business School During June 2015 s Nor-Shipping week, Oslo again takes center stage in the global maritime industry, attracting between 30,000 and 40,000 visitors from 70 countries. What is the attraction of Norway in the global maritime industry? Norway has been a maritime nation since the Viking age, so there is definitely the experience factor. Today, Oslo is home to the world s largest shipping classification agency, DNV-GL, the world s largest shipping bank, DNB, the world s largest auto shipping company, Wilh Wilhelmsen, and one of the world s leading maritime technology companies, Kongsberg. The Norwegian West Coast is home to the largest offshore vessel fleet in the world in terms of value, and the maritime equipment industry with hundreds of actors serve a global market. Even the specialized offshore vessel shipyards have enjoyed full order books. In Trondheim, we have NTNU and Marintek, the world s leading R&D institutions in maritime and ocean technology. The Norwegian maritime industry has taken lead positions in LNG and in green shipping, with the first battery operated fjord-crossing ferries already in operation. If we add seismic shipping, subsea technology, drilling technology, offshore services, and operating oil & gas companies, we find the most complete and most dynamic maritime offshore cluster in the world. No doubt, this industry deserves the term a global maritime knowledge hub. What happened to the Norwegian maritime offshore industry when oil prices dropped from nearly $120 USD / barrel to about $60 USD / barrel in the fall of 2014, with no signs of immediate recovery? Cyclical changes are not new to the maritime industry. It is rather the normal state of affairs in an industry that is used to moving through strong waves. In phase one, we saw maritime firms adjusting their capacity, laying off people, especially in oil services. Many offshore supply vessels, especially in the North Sea, remain idle. In turn, this hit the offshore yards hard, and the maritime equipment industry moves with the offshore yards. The downturn in the maritime offshore industry has started a number of important transitions that will take the Norwegian maritime industry through the crisis. First, drastic cost reduction programs have been implemented, which are often neglected during the boom periods. Then there is a reorientation towards more traditional shipping, although Norwegian companies meet very strong Asian competitors in this area. What seems to be a promising new agenda is the focus on the new ocean Industries. Ocean wind farms have already been in operation in the North Sea for some years, and other ocean energies are in the innovation phases: ocean wave power, ocean tide power, ocean solar power, and even ocean salt power. The world needs renewable energy, as the green shift is under way. For Norway, it is also natural to focus on the seafood industry, as fisheries were historically one of the industrial mothers of the maritime industry. We are talking about ocean aquaculture, as coastal waters of aquaculture approach the biological and ecological limits. There is an almost unlimited market for healthy seafood to feed a growing world population. In order to develop the ocean seafood industries, including offshore aquaculture, it takes maritime technology and specialized vessels. The Norwegian maritime industry is ready to take these new challenges, combining maritime technology with marine biotechnology, developing new types of seafood and important new health ingredients. Another promising area is seabed and subsea mining, and the first two seabed diamond mining vessels have been contracted by DeBeers, at Kleven Maritime outside Aalesund. The world will need minerals and metals to meet the economic growth in Asia and emerging economies. When oceans cover more than 70% of the world s surface, more than 70% of world s mineral resources must be in the sea. The same calculations may also apply to food, where the oceans today only provide a fraction of its food production potential. For a small and technologically advanced country like Norway, it makes sense to concentrate on the ocean industries and ocean technology. This is where we see the future of the Norwegian maritime offshore industries, as we utilize new technologies like sensor technology, remote control technology, big data simulation, and many other areas today known under the 4.0 label. What comes next is to combine offshore maritime technology with life science technology, and then new and thus far unknown ocean industries will emerge.

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17 INSIGHT China is investing tremendous resources in research and development. In 2013, total R&D expenditure amounted to over one trillion RMB, around 2% of China s GDP. At the same time, the sheer number of talent coming out of Chinese universities is unprecedented. In 2013 alone, over nine million students graduated from institutions of higher education, while the equivalent number in Norway was just above 42,000. In 2009, Statoil decided to establish a research and development center in Beijing to benefit from this development. The center currently consists of two departments, reaching a combined total of 15 researchers and two leaders. The research center has initiated several projects with select Chinese universities in order to speed up internal work and benefit from the academic research progress. The Beijing center is part of a global organization, which encompasses centers in Rio de Janeiro, Houston, Austin, Calgary, Bergen, Trondheim, and Porsgrunn. The aim of the research is to sustain Statoil s operations worldwide and to qualify new technology for the company. Seismic imaging is a key technology for the successful exploration of hydrocarbons. The field is highly competitive with respect to obtaining the best computational algorithms to accurately predict prospective oil and gas accumulations. Statoil s globally distributed research teams for seismic imaging were initiated about five years ago. The teams now produce newer and faster methods than previously available for the in-house technology customers, thus providing a cutting-edge value to the company. The Beijing department is largely involved in collaborative projects that aim to develop techniques for improving our ability to accurately map the subsurface geologic structures anywhere in the world. Xiaohui Zhang joined the seismic imaging team in 2011 as the first employee of the research center. His background from applied computational mathematics at the Chinese Academy of Science is crucial in solving the massive numerical problems related to using seismic data for creating geologic maps. Such maps are the fundamental basis for locating oil exploration wells. Research & Development: A Peek Inside Statoil By Are Osen, Researcher Eivind Smørgrav, Researcher Are Osen, Researcher Xiaohui Zhang, PhD Eivind Smørgrav, Researcher Licong Jin, Phd Our Beijing research team is young and diverse, and it is collaborating with both internal and external academic groups to strengthen their capabilities for producing novel technologies. For me, it was a challenging step to move from academic research into a businessoriented research team. Here, the focus on open collaboration and technology development is focused on real data problems to a large degree. - Xiaohui Zhang, Researcher The enhanced oil recovery team was established in 2012, and is currently fully occupied with challenges related to polymer injection. Statoil has set ambitious targets with respect to recovery rates and optimal use of existing fields. The current expected recovery rate from the Statoil operated fields on the Norwegian continental shelf is 50% on average. Basically, half of the hydrocarbons are stipulated to stay behind in the ground after end of production. China has a long and successful legacy with enhanced oil recovery from fields such as Daqing, ShengLi, and BoHai Bay. Hence, there is a great deal of relevant research being performed in China and corresponding knowhow at the national oil companies and universities. Work currently administered by local Statoil researchers in Beijing will enable better utilization of the remaining resources on the Norwegian continental shelf. Jingjing Hao is one of our local researchers who joined Statoil in 2013, after obtaining a degree in applied chemistry from China University of Petroleum, Beijing. The company gave a good impression with respect to values, competitiveness, and offshore technology, and also seemed to have an innovative culture to drive technical solutions forward. The open culture fit my personality very well, so I decided to get onboard. Currently, I am building models to represent the oil field during production, in order to design better methods to maximize the production. The aim is to model the effect of adding chemicals in the injection water. Jingjing Hao, Researcher According to Xiaohui, government funding and focus on research and innovation implies that a large number of people work in academic groups in China. The current trend is to target high-end research topics, providing competitive solutions that can drive the national commercial and technological advantages forward. This creates a competitive setting, which makes Chinese researchers attractive in the global labor market. ISSUE 2/2015 NORWEGIAN LINKS 17

18 The financial advisor with industrial expertise MERGER AND ACQUISITION EXPERTS IN SCANDINAVIA TAILOR-MADE TEAMS Industry and sector experts Extensive Scandinavian M&A experience Chinese cultural understanding INTEGRITY AND UNCOMPROMISED FOCUS ON THE CLIENT S BEST INTEREST Focus on value creation for clients Professional attitude Local Chinese responsible A BEST PRACTICE METHODOLOGY Mosaic approach Broad track record and many references Advanced M&A tool box ONE-STOP SHOPPING Full support through the whole M&A process Coordination of all activities Follow-up from China INFIMA CAN ASSIST CHINESE COMPANIES IN TAKING GLOBAL POSITIONS. WE HAVE ADVISORS WITHIN THE FOLLOWING SECTORS: Energy, oil and gas Oil services Property Maritime equipment Waste management Bank and finance Fish and aquaculture IT Telecom Facility services INFIMA HAS OFFICES IN OSLO, BERGEN AND SHANGHAI. PLEASE CONTACT CLEMENT FENG AT OUR SHANGHAI OFFICE: Room 32, 21st Floor, Bank of Shanghai Tower, 168 Yin Cheng Zhong Road, Shanghai China Tel.: / feng@infima.no

19 EXCLUSIVE Where Will Chinese Shipbuilding Go? By Johannes Neteland, Partner, Infima AS China s tremendous economic growth over the past 30 years has been based to a large extent on low costs. Factories have been built strategically to take advantage of the abundance of cheap labor, precipitating a boost in exports and generating millions of jobs. This has also been the case for Chinese shipbuilding. In 2000, Chinese shipbuilding capacity was approximately 1 million gross tons, and China was a small player in the world market with about 5% of output. Ten years later, China delivered more than 36 million CGT and was the largest manufacturer in the world with roughly 38% of output. A similar development can be expected to occur in the rig-building sector. From 2006 to 2013, China s total number of delivered rigs was only 10. However, in 2013, China received 41 new orders, becoming runnerup next to Korea s 53 orders. If this development continues, the likelihood of China becoming both the largest ship and rig-builder in the world very soon is significant. However, is size merely enough for the Chinese yard industry to call themselves world leaders? I would argue no. International equipment suppliers still receive nearly 40% of a delivered rig s value. For commercial ships, this share is lower, but for specialty ships it can be equally high, as Chinese yards are primarily steel structure manufacturers. The challenge is that international rig and ship operators do not want to risk a failure in one of their costly investments by using unknown suppliers of advanced stateof-the-art equipment. These operators also require global 24/7 service networks. Hence, they stick to well-known global brand names, very few of which are Chinese. With overcapacity already posing a challenge to world markets, further investment in capacity will only prolong the sluggish market. The road to prosperity for the industry points in another direction. To fully leverage on the investments in building capacity, the Chinese industry needs to invest in and incorporate the equipment suppliers. The industry can increase its value creation by 30 40% and its earnings even more, with more or less the same number of people as today. My prediction is that we will see much more of such investments in the coming years. ISSUE 2/2015 NORWEGIAN LINKS 19

20 THE BEST OF BOTH MBA PROGRAM

21 BEIJING CHAMBER The 2015 Annual General Meeting The NBA Annual General Meeting (AGM) was held on March 12th 2015, where a motion was passed to formally change the name from the Norwegian Business Forum (NBF) to the Norwegian Business Association (NBA). The name change was approved with the purpose of harmonizing with the other business associations in Asia. At the AGM, Chris Rynning, was re-elected Chairman and in addition, the board was extended to include nine members, with four additional observers to the board representing Norwegian organizations, including Klubb Norge and Noralumni. The increase of elected board members was approved with the purpose of being beneficial in increasing participation and membership levels. Recent Events The NBA has hosted and co-hosted many successful events since the beginning of the year. In January, Andrew Bateson from Gavekal Dragonomics jumpstarted the year recapping major events and trends from China in 2014, and introduced developments expected to continue in In February, Knut Anton Mork, representing Handelsbanken, presented his views on the Chinese economy and the reform plans implemented after the Third Plenum. In the beginning of March, NBA hosted an event with Hege Marie Norheim, SVP of Sustainability at Statoil, who addressed fundamental challenges for the oil and gas industry and discussed long-term prospects. Furthermore, the NBA co-hosted an event with MPS China and the Nordic Chambers on the 2015 Nordic Salary Survey, which turned out to be an incredibly popular and well-attended event. The NBA has hosted three joint Nordic chamber events in recent months focusing on eating safely in China, leadership and Sino-Nordic business communication. Safe to say, the NBA has had a successful year hosting events, and look forward to hosting many new exciting events in the coming months. ISSUE 2/2015 NORWEGIAN LINKS 21

22 SHANGHAI CHAMBER Recent Events The Norwegian Business Association, together with the Nordic joint Chambers, hosted an event on the Shanghai Free Trade Zone and foreign investment on May 27th. The event was sponsored by Kongsberg Maritime and Wikborg Rein law firm, and attracted close to 120 people. The audience was a fine mix of members from all of the Nordic Chambers. Speakers included Jacques Bertrand of JGB Systems & Services and Kjetil Lund of Kongsberg Maritime. The speakers shared insightful knowledge about their experiences in the Shanghai Free Trade Zone and the future benefits going forward. The presentation was followed by an update on the new foreign investment law from Ronin Zhong of Wikborg Rein law firm. The panel was joined by Fredrik Hahnel of SEB bank and Michael Chang of Danfoss. Both companies are currently in the zone and could share hands-on experience with the audience. The event was jointly hosted by NBA Chairman and Wikborg Rein Partner, Tormod Nilsen, as well as NBA board member, Banu Kannu of Wärtsilä Ship Power a playful and dynamic duo! The moderators opened the session by giving a warm welcome to the new members of the NBA who were present in the audience, including Finnair, Greencarrier, and Panda Display- Shanghai YunHan. Present at the meeting was also former board member Yilie Shen of Wilhelmsen, Bent Wessel-Aas of Kongsberg Automotive, and current board member and former Chairman, Erik Aaberg of Jotun. They were graciously served with traditional gifts for their loyal service and substantial contributions to the NBA. The event was hosted at the Andaz Hotel in Xintiandi, and was followed by an indoor BBQ due to heavy rain, where the delicious food and a delightful atmosphere made it a cozy night to remember. 22 NORWEGIAN LINKS ISSUE 2/2015

23 HONG KONG CHAMBER Chinese New Year Dinner On the 10th of March, NCCHK invited members to their traditional Chinese New Year Dinner in the Library of the China Club. We were honored that Ambassador Svein Sæther attended and addressed the guests with his reflections on the Hong Kong Norway relationship. AGM At the AGM, Dr. Derek Anthony stepped down as chairman after four years of dedicated service. Mr. Kjartan Furset was elected Chairman, while Dr. Anthony continues as a member of the board. Mr. Trygve Nøkleby was elected as new member of the board. Mr. Furset thanked Dr. Anthony for the dedicated and extensive effort he has put in for the Norwegian Chamber of Commerce in Hong Kong and appreciated that he will still contribute with his knowledge and experience as a board member. Norwegian Day in Hong Kong On the 27th of April, the Norwegian Embassy in Beijing, the Consulate General in Guangzhou, Norwegian Consulate in Hong Kong SAR and Macau SAR, in cooperation with the Hong Kong Shipowners Association and NCCHK, arranged Norwegian Day in Hong Kong. The event consisted of a daylong seminar on green shipping and a Norwegian Seafood Dinner at the Harbour Grand Kowloon Hotel. This was the first cooperation on a Norway Day in Hong Kong, and was a large success with close to 100 delegates for the green shipping seminar and 180 guests for the Seafood Dinner. The seminar introduced local and regional challenges as seen by the Hong Kong government. The seminar also included experiences from the greening of Norwegian shipping, as well as a close analysis of conversions and infrastructure for LNG as fuel for shipping. At the dinner, the head chef from FINDS treated the guests to a seven-course seafood dinner sourced from Norway. Entertainment was provided by Mr. Aksel Kolstad, an excellent Norwegian classical pianist. At the dinner, members of the NCCHK, as well as the shipping community in Hong Kong had a great opportunity to invite staff, business relations, and clients for a great evening both to strengthen existing relations as well as build new connections in the community. The dinner was rounded off with a lucky draw with excellent prizes sponsored by the Norwegian Seafood Council, Harbour Grand Kowloon, and SAS. NCCHK certainly hopes this very successful event will be the first of many cooperative events in the future promoting Norway in Hong Kong. ISSUE 2/2015 NORWEGIAN LINKS 23

24 NORWAY CHAMBER Members Meeting and Seminars held earlier in 2015 Members Meeting, Feb. 12th 2015 at NHO THE FIGHT AGAINST CLIMATE CHANGE IN CHINA China s efforts and Norwegian opportunities Programme: China s efforts and challenges by H.E. Ambassador Zhao Jun, Chinese Embassy in Norway Carbon capture a realistic alternative for industry? by Mr. Per Brevik, Director Sustainability and Alternative fuels Heidelberg Cement Northern Europe Panel discussion, Moderator: Mr. Geir Sviggum, Board member of NCCC Panel guests: Ms. Wang Li Head of Political Section at the Chinese Embassy in Oslo. & Mr. Per Jahren Civil Engineer, Professor, Concrete expert. Author of several books on concrete history and on Sustainability. Breakfast Seminar, March 19th 2015 at DNB Bjørvika NORWEGIAN BUSINESSES IN THE CHINESE FUTURE NCCC Breakfast Seminar Programme: The Chinese dream: How well positioned is the Chinese Leadership and President Xi Jinping in delivering on their own ambitions and the expectations of the Chinese people? by Mr. Henning Kristoffersen, Government and Public Affairs Director Asia, DNV GL The opportunities for the Norwegian business community in China today and in the future: How can we utilize an ever-growing and stronger China within almost every industry sector? by Mr. Pål Bråthen, Commercial Consul and Director, Innovation Norway, Shanghai The Norwegian dream in China: Norwegian high tech in partnership with Chinese business innovation. by Mr. Haakon Bryhni, Chief Technology Officer, Elliptic Labs. The presentations was followed by comments by Member of Parliament and deputy leader of SV, Mr. Bård Vegar Solhjell, who has actively been promoting the need for a renewed Norwegian strategy towards China. 24 NORWEGIAN LINKS ISSUE 2/2015

25 PERSPECTIVES The Dog and its Master By Chris Rynning, Partner Staur A friend of mine recently asked a Chinese politician how can it be that Chinese growth is slowing down, but its stock markets are speeding up? The politician told him a story about a dog and its master. A dog naturally wants to run away from its master, but cannot stray too far. Eventually, the dog will have to come back for food and safety. The Chinese politician then smiled and asked How come you yourselves remember so little your own history? UK and Dutch companies once were irrationally funded by retail investors to go out and explore on weak prospects and poor business plans. He continued, The Chinese stock market is like western markets 100 or 200 years ago. Chinese retail investors know that they are funding companies that are starting out on almost impossible journeys. Some of them will find shores, many others will not. The Chinese stock market is fueling dreams of finding new found land and is not based on earnings and fundamentals. There will be a time for that, but that time is not now. With the Chinese stock market up 126% over the past year, the biggest advance among major economies, the outlook for Chinese equities are cloudy. On May 28th, the market had a 6.5% correction, following a blow up of solar firm Hanergy. More corrections will follow and many companies are overvalued. With retail investors dominating markets here, events are not easy to spot nor do they send markets in clear directions. Psychologies, rumors, and speculation seem as determining of share price formation as company fundamentals. At the end of May, the Shenzhen stock market was trading at an average of 61x earnings, nearly three times more expensive than the U.S. stock markets. However, the US stock markets are valued at 1.4x GDP while the Chinese market is only at 1x GDP. The inevitable growth of Chinese GDP indicates further growth in total market capitalization, but selective picking is required to find the dogs that will return safely to its master, and those who will not. ISSUE 2/2015 NORWEGIAN LINKS 25

26 Asset Management & Corporate Advisory