Austal plans to divest stake in Chinese business

Australian company Austal has announced plans to sell its stake in its Chinese shipbuilding joint venture (JV). The move comes against a background of deteriorating Australia-China relations and reflects the company’s aims to build defence sales in the United States and Asia.

Austal said in a notice to shareholders in late April that it has started talks with Chinese firm Guangdong Jianglong Shipbuilding to sell Austal’s 40% shareholding in Aulong Shipbuilding, a JV set up between the two companies in Guangdong, China, in June 2016. Jianglong Shipbuilding currently holds a 60% stake in Aulong Shipbuilding.

Austal said that a letter of intent has been executed by the parties targeting completion of the negotiations by late October 2021. Aulong Shipbuilding, which comprises two shipyards and employs about 1,000 people, was set up by Austal and Jianglong Shipbuilding to build commercial passenger vessels.

An Austal spokesperson told Janes on 3 May, “Austal is negotiating to sell its shareholding in Aulong because the domestic ferry business hasn’t grown like the company had envisaged five years ago when we established the JV.”

The spokesperson added, “Austal’s focus is moving into steel shipbuilding in the US and growing our defence and commercial business in Southeast Asia, so we can’t give the Aulong JV the attention and capital it needs to grow.”

Chinese-Australian relations have deteriorated since 2018 due in part to concerns in Australia about China’s growing influence in sectors including politics, trade and investment, and science and technologies. Such concerns prompted Australia in 2020 to introduce greater levels of scrutiny on incoming investment.