[LINK] O/t: China's dominance in global shipbuilding strengthens amid surging global-demand

[Stephen Loosley]

China’s dominance in global shipbuilding strengthens amid surging global demand

China’s shipyards are set to be the main beneficiaries of a wave of new orders as their South Korean competitors adopt a more “cautious” approach, according to ING

By Ralph Jenningsin Hong Kong and Frank Chenin Shanghai Published: 5:00pm, 18 Dec 2024

https://www.scmp.com/economy/global-economy/article/3291320/chinas-dominance-global-shipbuilding-strengthens-amid-surging-global-demand



China, the world’s largest shipbuilder by market share, is expected to receive a raft of new orders as the global industry enters a renaissance, analysts said.

Demand for new ships is expected to surge over the next few years, as shipping companies have a “pressing need” to replace ageing vessels and comply with new environmental regulations, according to Min Joo Kang and Rico Luman, economists at the financial firm ING.

And China is set to be the main beneficiary of this market upswing, with its primary competitor South Korea likely to take a more “cautious” approach by focusing on profitable and reliable orders, the economists said in a research note released on Monday.

“Over the past two years, we have seen some previously closed shipyards in China reopen and start picking up orders again,” the analysis said. 

“The largest fraction of the fleet eligible for replacement consists of bulk carriers, which are predominantly built by Chinese shipyards.

“This could drive a stronger need for investment expansion in China.”

London and Shanghai-based industrial consultancy Hartland Shipping Services has also predicted sustained growth for the entire sector, with the prospects particularly bright for Chinese shipyards.

In October, market demand for new-build container ships reached its highest level since the second quarter of 2021, the peak of the last wave of global shipbuilding, the company said in a report published that month.

The need for new ships is being driven in part by the introduction of the UN International Maritime Organisation’s Energy Efficiency Existing Ship Index and Carbon Intensity Indicator in January 2023, which mandate that all ships calculate their energy efficiency and carbon ratings to cut pollution, according to ING.

Global shipbuilding boomed between 2002 and 2008 due to China’s rapid economic growth and an expansion in global trade, but the industry suffered a downslide following the global financial crisis in 2008.

China also emerged as a dominant player in the shipbuilding industry during that period, with its builders churning out container ships, bulk carriers, oil tankers and liquefied natural gas (LNG) carriers.

According to shipping market analysts Clarkson Research, Chinese shipyards commanded an overwhelming 86 per cent of global orders for new ships as of September, followed by South Korea with a 12 per cent share.

China accounted for 55 per cent of the global order backlog as of the end of September, with South Korea making up a 26 per cent share, Clarkson Research said.

China’s rise as a leading force in the global shipbuilding industry can be attributed to its large-scale production capacity, strong workforce, investment in new technology and government refund guarantees.

Labour in China’s shipbuilding industry costs 50 per cent less than in South Korea or Japan, according to ING, and Chinese companies also benefit from access to cheap steel.

At the same time, the Chinese government provides “sovereign refund guarantees” for certain classes of vessels, easing financial burdens on shipyards, ING said.

Though South Korea’s market share has fallen over the past four years, its shipbuilders “lead in efficiency”, ING said. 

High-value ships such as LNG carriers are often sourced to Korean builders, it noted.

Shipbuilding accounts for a greater share of total exports in South Korea than in China or Japan, according to ING. 

In China, most orders are placed domestically.

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AHWC