Shipbuilding industry accelerates its foray into high value-added sectors

2013-09-03 09:00

Currently, the Chinese government is determined to restructure its sluggish shipbuilding industry. This signifies the end of nearly a decade of low-priced shipbuilding in China, and the ship owners worldwide who have long benefited will inevitably be affected.

According to TradeWinds, the State Council recently issued the "Implementation Plan for Accelerating Structural Adjustment and Promoting Transformation and Upgrading of the Shipbuilding Industry (2013-2015)". This three-year shipbuilding plan is largely in line with industry expectations, but its profound impact on China's shipbuilding industry and its long-term impact on global ship owners and the shipping market over the next decade and beyond cannot be ignored.

According to this "Implementation Plan", China is undertaking a fundamental restructuring of its overcapacity in shipbuilding, strictly controlling the growth of shipbuilding capacity. Furthermore, it requires financial institutions to stop issuing loans for new shipyards, guiding ship enterprises to shift their focus to high value-added ships and marine engineering equipment. It encourages mergers and acquisitions among ship enterprises to promote the transformation and upgrading of the shipbuilding industry. In fact, China's shipbuilding industry has a clear goal: to achieve 25% and 20% market share in global high-tech ships and marine engineering sectors, respectively, before 2015.

China's determination to restructure the shipbuilding industry is evident in the performance of Chinese shipyards in the first half of this year. The total profit of 80 major shipyards nationwide was 3.58 billion yuan, a significant year-on-year decrease of 54%, and the backlog of orders also dropped significantly by 23%.

TradeWinds indicates that China's newly released shipbuilding plan will not have an immediate impact on domestic and foreign ship owners, as implementing this plan requires time. However, the impact is inevitable; it's only a matter of time.

Currently, new ship prices are rising from recent historic lows and will continue to rise. As China's shipbuilding industry restructuring intensifies and mergers and acquisitions accelerate, ship owners will gradually lose the opportunity to obtain low-priced ships.

It is expected that China will remain the world's largest shipbuilding country in the next ten years, but it will no longer be a base for low-end shipbuilding. Instead, China will follow the trend of the global shipping industry and move towards the field of intelligent high-end ships.

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