STX Dalian's affiliates file for bankruptcy reorganization

The Liaoning provincial and Dalian municipal governments had earlier tried to help STX Dalian in restructuring its assets. A consortium of banks including Bank of China Co Ltd, China Minsheng Bank Co Ltd, Bank of Dalian Co Ltd and the Shanghai Pudong Development Bank Co Ltd had extended loans worth 2.85 billion yuan to STX Dalian in 2009.

Currently most of these loans are due for repayment. STX has been unable to repay the loans, and many of them are already long overdue.

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"STX Dalian is still capable of gaining orders and building ships because it has advanced technologies and has carried out strict quality control procedures," said Zhao. "The shortage of money has blocked profit channels and further deepened the shipyard's financial dilemma."

The financially troubled STX Dalian shipyard hasn't paid workers for months, and most of the departments in the shipyard have been given more than 10-day holidays since April last year, and when they came back to work later, the shipyard gave them more holidays because of a "temporary power shutdown".

The STX headquarters also ordered the shipyard to send a large number of manufacturing equipment and parts, as well as unfinished vessels back to South Korea in the second half of 2013.

"It won't be easy for either Chinese or foreign companies to take over STX Dalian due to its huge outstanding debt," said Wang Jinlian, secretary-general of the China Association of the National Shipbuilding Industry in Beijing.

China's new ship orders hit 34.73 million deadweight tons from January to May this year, up 108 percent from the same period a year earlier, Wang said. This has been pushed by market speculation and a real recovery in both shipping and shipbuilding industries is still far off, he said.

"The current ship prices for all three major ship types - container vessels, oil tankers and bulkers - are at least 30 percent cheaper than the market prices before 2008," Wang said. "For capable Chinese companies, buying such a big and financially complicated foreign business will neither be manageable nor profitable."