Completion volume dropped by 13%! China's shipbuilding industry enters 'acceleration' mode

Due to reduced order sizes and the impact of the COVID-19 pandemic, the completion volume of Chinese shipyards showed a significant year-on-year decline in the first half of this year. However, with the gradual lifting of lockdowns across the country, Chinese shipyards are accelerating their efforts to catch up on the backlog.

Clarksons' recently released report indicates that last year, as market sentiment improved, the completion volume of Chinese shipyards reached 13.7 million CGT, the highest since 2013, far exceeding the average annual level of 11.6 million CGT between 2016 and 2020. Simultaneously, the product structure of Chinese shipyards has become increasingly diversified. In 2021, bulk carriers accounted for 39% of the total completion volume (calculated by CGT), tankers and container ships accounted for 21% and 17% respectively. Between 2011 and 2015, bulk carriers averaged 54% of annual completion volume.

However, two key factors have affected the completion volume of Chinese shipbuilding this year. Firstly, similar to other countries, after experiencing a downturn in the new shipbuilding market in 2020, the order backlog of Chinese shipyards has decreased. According to data from early 2022, Chinese shipyards had a total of 32 million CGT of ships scheduled for delivery within the year, 13% lower than in early 2021. In the first quarter of this year, Chinese shipyards completed 3.2 million CGT, a year-on-year decrease of 11%.

On the other hand, since March, the COVID-19 pandemic, particularly the Shanghai lockdown, has also caused a decline in shipyard completion volumes. The three major shipyards in Shanghai, which accounted for 17% of domestic deliveries last year, ceased production at the end of March and gradually resumed production between April and July. Other shipyards in China were also impacted by the epidemic, for example, in terms of equipment or material manufacturing and transportation. In April this year, the completion volume of Chinese shipyards fell to 800,000 CGT, a year-on-year decrease of 24%, with zero deliveries from Shanghai shipyards.

Overall, Clarksons' data shows that the completion volume of Chinese shipyards in the first half of this year decreased by 13% year-on-year. With the post-lockdown increase in shipyard output, in June, the completion volume of Chinese shipyards decreased by only 8% year-on-year, and some shipyards expect to return to normal production levels by mid-July.

According to the latest statistics released by the China Shipbuilding Industry Association, the national shipbuilding completion volume in the first half of the year was 18.5 million deadweight tons, a year-on-year decrease of 11.6%, and a month-on-month increase of 64.2% in June. Among them, the completion volume of export ships was 15.81 million deadweight tons, a year-on-year decrease of 19.9%, accounting for 85.5% of the total completion volume during the same period. Despite the year-on-year decline, China's shipbuilding completion volume in the first half of the year still ranked first in the world, accounting for 45.2% of the world's total in terms of deadweight tonnage.

The China Shipbuilding Industry Association pointed out that in the first half of the year, shipbuilding enterprises overcame the impact of the epidemic, adopted closed-loop management methods, and focused on production planning and scheduling. The construction efficiency of key shipbuilding enterprises continued to improve, and the key cycle of the main ship types of various enterprises was shortened by 5%-20%, effectively ensuring the timely delivery of ships.

Clarksons predicts that the completion volume of Chinese shipyards will increase in the second half of this year. Referring to 2020, when the completion volume of Chinese shipyards plummeted by 46% in February-March due to the outbreak of the epidemic, the annual completion volume still reached 11.1 million CGT, only 5% lower than in 2019. Therefore, Clarksons points out that this shows that Chinese shipyards have the ability to increase delivery speed, and the total completion volume this year is expected to reach 11.9 million CGT, a year-on-year decrease of 13%, but higher than the initial prediction. The completion volume prediction for 2023 will increase to 14.2 million CGT.

However, the prediction of the China Shipbuilding Industry Association is apparently more optimistic than that of Clarksons. The China Shipbuilding Industry Association predicts that China's total shipbuilding completion volume this year will exceed 40 million deadweight tons. In comparison, data from the beginning of this year shows that the total shipbuilding completion volume in 2021 was 39.703 million deadweight tons, a year-on-year increase of 3.0%.