
From solar panels to consumer electronics to shipping, it seems that China tends to quickly carve a niche in every high-margin market China gets into. The lucrative world of oil rig building isn’t immune to the unique Chinese combinations of low-cost, friendly financing, and quick delivery. (Let’s leave all discussions of comparative quality aside.) Indeed, China has quickly cornered 40% of the global market in oil rigs – a market worth tens of billions of dollars annually. Thanks to discount pricing, China quickly left its regional low-end or shallow rig-building rival, Singapore, in the dust. Well, China’s foray into rig building has a significant industry in China’s overall economic portfolio exposed to the continuing slump in global oil prices. As more and more drillers announce cutbacks in their capital expansion plans, Chinese rig builders are quickly finding themselves in the lurch. Due to aggressive pricing and rock bottom financing (1% down payments are not uncommon), China’s shipbuilders-cum-rig specialists are facing a serious financing crunch. Many are leveraged to the gills and rig prices aren’t bouncing back. In fact, rig projects continue to be canceled at an accelerating pace.