Rongsheng Heavy Industries shares suspended after reports of protest

Shares of China Rongsheng Heavy Industries Group Holdings were suspended on the Hong Kong Exchange & Clearing on Thursday July 4 following reports of a protest by workers and possible cash crunch.

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Hundreds of sub-contract workers had protested outside the shipbuilder’s production base in Rugao, Jiangsu province on Tuesday, demanding unpaid wages and job offers, the state-run Xinhua news agency reported on Wednesday.

Rongsheng admitted to Xinhua that it had terminated the contracts of those workers on low production utility rate due to a lack of new orders this year. But it denied withholding their wages.

The company said the lay-off was also due to its restructuring plan as it seeks to shift its business from that of a bulk carrier builder to an offshore vessel manufacturer.

But Rugao’s local government said it was the sub-contractors who organised the protest to demand for more work, Xinhua reported.

The protesting workers had been persuaded to leave later on Tuesday after reaching an agreement on compensation, sources told Xinhua.

Rongsheng declined to comment when contacted by Steel First on Thursday but said it would release clarifications soon.

Xinhua reported that as Rongsheng was facing a cash crunch, the lack of new ship orders made things worse for it.

The company put a cap on base salaries for both its management and workers in April. It also owes 6.7 billion yuan ($1.1 billion) in bank loans, Xinhua reported.

Meanwhile, the China Shipbuilding Industry Corp (CSIC) has signalled an interest in taking over Rongsheng, subject to an attractive offer, according to a report by Chinese business newspaper 21st Century Business Herald, which quoted a source at CSIC.

Rongsheng was cast into the limelight in 2008 after it won a $1.6 billion order from Brazilian iron ore miner Vale for a dozen 400,000-deadweight-tonne very large ore carriers.

But after listing on the Hong Kong stock exchange in November 2010, the shipbuilder’s share price kept falling as the shipping and commodities markets tumbled.

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