SteelOrbis Shanghai
China's
shipbuilding industry is currently at its peak in the history of the country. In recent years,
China's ship
production output has increased sharply with an average growth rate of over 40 percent a year – far higher than the average pace of growth of the
shipbuilding industry worldwide. For about 10 years prior to 2006,
China was the third biggest
shipbuilding country in the world. However, during the period up to the middle of 2006,
China exceeded
Japan and is now ranked second in the world. Around 70 percent of ships made in
China are built for overseas buyers.
According to industry data, during the Jan-Jun period, new ship orders received by
China totaled 16.08 million carrying capacity tons – equaling a 15 percent share of the world market. Some major ship manufacturers in
China have even arranged their
production until 2009 in their compact
production plans.
There are both positive and negative factors affecting
China's
shipbuilding industry and its future development. The favorable factors include:
International trade boom and shipbuilding industry transfers to China
The boom in international trade entails a strong demand for logistics and ships.
China's dominance in
shipbuilding is obvious - short
production cycles, low
production costs, improving technology levels, etc. Therefore, while the world's
shipbuilding industry is transferring to Eastern Asia, Eastern Asia's
shipbuilding industry is transferring to
China. And
China is grasping with both hands an opportunity like this that only comes once in a blue moon.
Both central and local governments support the Chinese
shipbuilding industry
On August 16, 2006,
China issued a middle and long term development program for the
shipbuilding industry. The program states that
China's goal is to develop an advanced technology and innovation capability and become the most powerful country in world
shipbuilding. As regards local government, many of the coastal provinces and cities are fostering
shipbuilding as one of their major industries. Zhejiang plans to invest RMB 10 billion ($1.27 billion) to set up 10
shipbuilding bases in the next couple of years. Provinces with similar ambitions include Guangdong, Jiangsu and Fujian.
Negative factors affecting
China's
shipbuilding industry include:
Industrial cycle and potential capacity surplus
It has been said that the world shipping industry reached its peak in 2005 and is tending towards a decline at the end of 2006. Some experts have even claimed that, under the influence of the world shipping industry,
China's
shipbuilding industry will probably enter a recessionary period. In this eventuality, the huge capacity currently being created in
China will be surplus to requirements.
Excess of competition leads to disorder
Currently, a lot of capital is flowing into the
shipbuilding industry and many new companies are rising up. According to industry data, there are a total of over 800 large scale
shipbuilding enterprises in
China. As to middle- and small-sized businesses, the number of them is far greater. In Zhejiang alone, there are more than 500
shipbuilding facilities spread along the coastline - not including many of the temporary
shipbuilding project teams without their own facilities who rent shipyards to build ships. To compete for orders, some of these market players have to quote low prices and then decrease costs by all possible means. Some of their methods even pose a threat to the safety standards of the ships they produce.
Appreciation of RMB
Due to the sustained RMB appreciation and the fixed sales prices of ships (mostly in USD and Euro), many ship builders suffered losses from late 2005 onwards. Such a trend seems destined to continue.
Generally speaking, the present situation of a ready market for
shipbuilding will last for another few years. If the world's economy continues to develop positively, the good period for
China's
shipbuilding industry will last longer. However, the industrial cycle and the increased capacity will bring great difficulties in their wake at some date in the future.