Competition heats up between international shipbuilding countries

China has (so far) this year replaced Japan as the biggest builder of bulk carriers, while South Korea has usurped China by taking the most new orders for tankers since January 1. 


Bulkers

China has bagged firm orders for 129 new bulk carriers or 55% of the total 234 bulkers that were contracted during the first 10 months this year, according to Alibra data.

Globally, only 34 new bulkers were ordered firm during the same period last year, of which the majority (50%) were contracted at Japanese yards.

On the surface, there have been few surprises during 2017 to date. Greek companies have placed all their firm orders (40 ships) at South Korean yards. Japanese and Korean carriers have favoured compatriot shipbuilders.

Closer inspection reveals the rising importance of Chinese financing, but this has not necessarily favoured domestic yards. China’s Bank of Communications has ordered 22 firm bulk carriers this year, of which 14 will be built in South Korea and the rest in China.

Tankers

The tanker market is also seeing tastes change, although ordering activity has stayed relatively flat year-on-year (169 vessels during the first 10 months of 2017, compared to 165 in the same period 2016).

This year so far, firm orders for almost 60% (100 vessels) of all new tankers have been ordered from South Korean shipyards, compared to 27% at this point in 2016.

Contracts were placed at a more internationally diverse mix of shipbuilders during the first 10 months of 2016. China took the crown with 39% of firm tanker orders (65 vessels), but this was followed relatively closely by Korea with 27% (44 ships) and Japan with 21% (34 ships).

Aside from the big three shipbuilding countries, the 2016 period saw firm tanker orders placed in Russia, Spain, Vietnam, Finland, Turkey, the Philippines and Indonesia. Most of these orders were for small tankers for specialised / short-haul trades. There appears to have been little ordering activity of this kind in 2017.

Wider picture

China's Yangzijiang Shipbuilding Holdings has this week said it expects new orders worth $2.0 billion during 2018. The company received new orders of 59 vessels (across all types) with a combined value of $1.6 billion, year-to-date, which is nearly double the full-year 2016 figure.

On the surface, the figures paint a bullish picture for Chinese shipbuilding, but the fact remains that the sector is still racked by overcapacity, despite ongoing measures to trim the fat. That being said, Yangzijiang is reportedly building its first crude tanker, which is surely the sign of things to come. Chinese yards will continue to churn out ‘simple’ vessel types quickly and at a discount to international competition.

South Korean yards have dropped their prices, which may account for the country’s increased share of international tanker orders. For instance, a new 159,000-dwt suezmax was priced at around $68.0m per unit at HHI in 2014, but orders were recorded in May this year at a price of $55.0m per vessel.

Firm orders for 100 tankers were placed at Korean yards this year to date. In spite of the big yards’ troubles, this figure isn’t far off what has been seen in previous years – some 149 tankers were contracted in Korea during 2014 and 155 in 2015.

That being said, the impact of the downturn still looms large for big South Korean yards, which are finally turning a small profit again following massive self-rescue plans, which included combined job cuts of at least 20,000 during 2016.

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