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Business deals

Mitsubishi Heavy in talks to sell flagship shipyard in Nagasaki

Move marks exit from building of LNG and other large resource carriers

The Mitsubishi Heavy Industries plant in Nagasaki, which is likely to be sold to Oshima Shipbuilding.

TOKYO -- Mitsubishi Heavy Industries is to sell its Koyagi plant, the main one of two located in Nagasaki.

The Japanese conglomerate is in talks to sell the plant to Oshima Shipbuilding, the country's third-largest shipbuilder based in Saikai, Nagasaki Prefecture. The parties are yet to agree on the sale price.

With the sale, Mitsubishi Heavy will in effect withdraw from construction of large vessels carrying resources such as liquefied natural gas.

While shipbuilders in South Korea and China make moves to realign, the Japanese shipbuilding industry is expected to accelerate its own changes.

Mitsubishi Heavy plans to announce the sale as early as next week.

China State Shipbuilding and China Shipbuilding Industry, respectively the largest and second largest shipbuilders in China, merged in November. Hyundai Heavy Industries, South Korea's top shipbuilder, is merging with third-largest Daewoo Shipbuilding & Marine Engineering. The two merged companies will together have about 40% of global market share.

Although Japanese builders together represent over 20% of the market, there are more than 10 of them, making individual companies hard pressed to compete with larger Chinese and South Korean rivals offering lower prices.

Order backlogs at Japanese shipbuilders are at the lowest levels in 10 years. Environmental regulations will be tightened in 2020, including control on the sulfur content of ship fuels. This is expected to boost competitiveness of ships with energy-conserving features.

In Japan, Imabari Shipbuilding, the country's top shipbuilder, and second-ranked Japan Marine United announced a capital tie-up deal last month.

Mitsubishi Heavy ranked fourth in shipbuilding volume in Japan at 800,000 gross tons on a nonconsolidated basis in 2018. Sales in its commercial ship division totaled about 100 billion yen ($921 million) in the same year.

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