Shipbuilding and Repair

China - the world’s leading shipbuilder


Malcolm Latarche
Malcolm Latarche
ShipInsight

14 May 2019

China - the world’s leading shipbuilder

China, South Korea and Japan are the heavyweights of world shipbuilding in every sense of the word, producing more than three quarters of the world’s vessels by number and even more by deadweight. However, the size of the industries and their dominant position is no protection against falling orders and all three nations have suffered over the past decade with bankruptcies, yard closures and mergers making more headlines than production figures.

The overcapacity of the countries’ yards and their need to attract orders to keep trading has depressed newbuilding prices with many analysts saying that the bargain-basement prices for newbuildings are among the main causes of over-tonnaging in shipping itself. Although the effect of excessive ordering should be self-evident, it seems difficult for many owners to act with restraint and each time it looks as if some sanity is returning, an order by one operator seems to trigger a herd reaction as others follow.

It could also be argued that the fact that China’s industry is mostly state-owned and the South Korean government is loath to see its industry reduced, with both propping up ailing or financially troubled enterprises, has not helped.

China

China has been the world’s leading shipbuilder since 2010 when it finally overtook South Korea. Two state-owned enterprises, China State Shipbuilding Corporation (CSSC) and China Shipbuilding Industries Corporation (CSIC), are the dominant players. CSSC has 18 yards and is headquartered in Shanghai, controlling most of the yards in the South and West of China while CSIC is run from Beijing and controls 13 yards in the North and East. For both organisations, individual yards are normally listed as the builder rather than the parent company.

In 2018 it was rumoured that the two organisations would merge to form one entity and events in early 2019 would seem to support the idea of a merger as both organisations have been restructuring their operations. This has resulted in some of their subsidiary loss-making enterprises being liquidated and yards within each group being merged. Analysts expect that more details of a proposed merger will be made public later this year.

In addition to the yards of the two state-owned enterprises, there is a high number of private corporations engaged in shipbuilding. Some of these are major operations and many are small scale. The Chinese government has limited the number of private yards which can bid for international contracts in recent years.

China was once considered as a builder of only simple ship types such as bulk carriers and tankers, with LNG carriers and large container ships being thought of as too valuable to entrust to Chinese yards. Over the past few years, that image has been shattered and China has won contracts for all ship types, including cruise ships normally considered as the pinnacle of shipbuilding ability.

China’s new-found wealth has been a spur to increased popularity for cruising in the country prompting Carnival Cruises to establish a Chinese operation with vessels being transferred from other areas to cater for the growing market. More importantly for Chinese ambitions, Carnival has entered into an arrangement with CSSC and Italian builder Fincantieri that will see two cruise ships constructed at CSSC’s Shanghai Waigaoqiao yard for delivery in 2023 and 2024. There are also options for a further four ships.

The impact of the cruise ships in deadweight terms is minimal since they will only be about 13,000dwt each but at 165,000gt they are large cruise ships. They will be based on Carnival’s Vista class ships, the first of which was delivered by Fincantieri in 2016, so they will be around 324m in length and accommodate some 4,000 passengers.

China

The Vista class vessels are diesel-electric with MAN engines and ABB Azipod propulsion systems. In March this year ABB confirmed it had been contracted to supply the propulsion and electrical systems for the new Chinese variants.

As far as gas carriers go, it is now more than 10 years since China delivered its first LNG carrier to a domestic owner and in the intervening years it has steadily increased its expertise in this area. Last year it delivered five vessels of 170,000m3 capacity to different owners.

Large container ships also hold no fears for Chinese builders. Having gradually increased their ability in building ships up to 15,000teu, last year the COSCO Shipping Aries was delivered by the Nantong yard and the COSCO Shipping Taurus by Shanghai Waigaoqiao as China’s first 20,000teu ships. A further 10 similar ships have been delivered since to COSCO with more on order; also on order is a series of 22,000teu vessels for CMA CGM which are notable for being the first mega container ships intended from the outset to run on LNG.