Outlook for global shipbuilding industry dismal as order books have halved and ‘touching historic lows’
- Data from shipping data provider Clarksons Research showed that the global order book for shipbuilders had fallen by 54 per cent by mid year
- China has been encouraging consolidation among state-owned shipbuilders to reduce overcapacity and stem losses
This year has been one of the worst on record for the global shipbuilding industry as order books have halved in value, causing pain to companies in China, South Korea and Japan, which account for more than 90 per cent of the market.
Clarksons Research, the world’s leading provider of data for the shipping and shipbuilding industries, estimated that the global order book had fallen by 54 per cent by mid year, noting they were “touching historic lows” and that “limited new capacity can be expected for some time”.
“We are just surviving, all of my friends are just surviving,” said Chen Anming, ship marketing director of state-owned Wuhu Shipyard, based in Anhui province, at the recently concluded Marintec China shipbuilders’ exhibition in Shanghai, summing up the mood among China’s shipbuilders.
China, which accounted for 40 per cent of shipbuilding in 2018, has been encouraging consolidation in the sector to reduce overcapacity and stem losses.
A map of Chinese shipbuilders distributed at the show listed 259 shipyards dotting China’s coastline, and 143 of these were located in Shanghai or in the neighbouring provinces of Zhejiang or Jiangsu.
This year, the mainland’s two biggest shipbuilders, China State Shipbuilding Corporation (CSSC) and China Shipbuilding Industry Corporation were merged, creating a group reportedly accounting for half of China’s overall capacity and employing more than 300,000 people.
Although CSSC announced orders of more than US$4 billion at the exhibition, one employee with the ship leasing division said that the company’s order book would take at least two more years to recover.
Consolidation seems to be a universal theme among shipbuilders globally given the state of the sector.
Two of South Korea’s largest builders, Hyundai Heavy Industries and Daewoo Shipbuilding and Marine Engineering are working on a merger. Japan’s two largest shipbuilders, Japan Marine United Corporation and Imabari Shipbuilding, are also planning a merger.
“We are hoping for more reduction of competition – everyone is looking for a lower price right now,” said Feng Bing, an executive director at Cosco Shipping Heavy Industry, the shipyard operator of Cosco Group, pointing to the state of the industry.
We are just surviving, all of my friends are just surviving
Guy Platten, secretary general for the International Chamber of Shipping, the world’s biggest shipowners’ organisation, said that owners are unsure what kind of vessel to order, owing to uncertainty in the market and in forthcoming environmental regulations that could affect ship design, engineering, or even the type of fuel a ship will use.
“From a finance point of view, these are big strategic decisions that owners have to make. It’s definitely affecting ship ordering,” Platten said during a recent visit to Hong Kong.
China’s shipyards are keen to move beyond dry bulk vessels that carry commodities like iron ore, grain or coal, and into higher margin, higher technology ships, such as cruise liners or ships that emit less greenhouse gases.
During the Marintec show, Dalian Shipbuilding Industry, one of the shipyards under CSSC, announced that it had received approval in principle from Lloyd’s Register, the maritime classification society, for its design of a 23,000 TEU (20-foot equivalent unit) container ship powered by ammonia, the first such design in China.
Hudong-Zhonghua shipyard, also part of CSSC, announced a new design for a LNG-powered, 25,000 TEU container ship, which would be the largest of its kind in the world, if launched.
Meanwhile, retrofitting ships with sulphur scrubbers is keeping shipyards busy. On January 1, rules regarding the elimination of sulphur from ship exhaust go into effect, causing owners to worry about the availability and high cost of low-sulphur fuel supplies. A number of shipowners have opted to install “scrubbers” on their ships, which clean the exhaust smoke and thereby removing sulphur.
“I am optimistic for the next year [as] we are expecting a big upswing compared to the last three years,” said Alf-Kare Adnanes, general manager of ABB Marine & Ports China, which supplies electrical systems and efficiency solutions to shipyards.
Adnanes said that the need to meet higher expectations of shipowners and environmental regulations will force Chinese shipbuilders to focus on high value, sophisticated vessels.
