Yangzijiang Shipbuilding discloses customers began arbitration proceedings for $1.09 billion

SINGAPORE – Yangzijiang Shipbuilding announced that arbitration proceedings had been filed in London two years ago against three of its units over the orders of 10 vessels worth US$900 million for alleged breach of contract.

The China-based shipbuilder said in a regulatory filing on Oct 12 that the customers had in 2022 terminated the contracts for the 10 vessels shortly after placing orders for them in late 2021.

These unidentified customers commenced the arbitration proceedings, alleging breach of contract by three wholly owned subsidiaries of Yangzijiang.

The customers are claiming US$835 million (S$1.09 billion) for compensation, including loss of profits as well as refund of the payments made, which total US$3.3 million.

The first tranche of arbitration hearings is scheduled for November 2024.

Yangzijiang’s shares fell on Oct 14 after its announcement. The counter closed at $2.43, down seven cents or 2.8 per cent.

It is unclear whether the shipbuilder had earlier made the announcement about the abolition of orders when these customers wanted out of their contracts.

Yangzijiang said on Oct 12 that it had earlier been legally advised there were “no merits” in the claims, and they were “highly improbable to succeed”. Its units were instructed to defend against the claims in the arbitration proceedings.

It also noted that there was substantive progress in the arbitration proceedings only during the course of 2024, and its expert witness said that the quantum of the claims is “incorrectly measured and highly inflated”.

The claims are not expected to have a material adverse impact on the group’s financial position for the financial year ending December 2024, Yangzijiang said.

“Nevertheless, to promote transparency and uphold the orderly functioning of the capital markets, the company considers it appropriate to provide this update to its shareholders,” Mr Ren Letian, chief executive of Yangzijiang Shipbuilding, said in the statement.

The total outstanding order book at the shipbuilder was a “record US$20.2 billion for 224 vessels” as at June 30, according to Yangzijiang’s financial results released in August.

THE BUSINESS TIMES