South Korea breaks China’s dominance in shipbuilding industry

Erika Na: South Korean shipbuilders accounted for more than 70 per cent of global orders in February, dwarfing their Chinese counterparts, according to a new report, though analysts say while competition has intensified between the two countries, monthly figures are volatile.

Ship orders totalling 2.1 million compensated gross tonnage (CGT) were made across the world in February, a 25 per cent fall on the same month last year, said Clarksons Research, a British shipbuilding- and shipping-market analysis company that publishes monthly reports on aggregated global shipbuilding orders.

South Korea received orders for 34 ships totalling 1.56 million CGT, accounting for 74 per cent of all orders last month. China booked orders for nine vessels at 170,000 CGT, about 8 per cent of the total.

These figures are in stark contrast to those from January, when China topped the list after taking 45 per cent of global orders compared to South Korea’s 33 per cent.

There may have been a decrease in tanker and bulk carrier orders in the short term, but there are bound to be ups and downs when it comes to such orders

In February, far fewer orders were made for general crude and bulk carriers that Chinese shipyards focus on, whereas there were more requests for high-value and eco-friendly vessels that South Korean shipyards have an advantage in producing.

“Fluctuations in monthly market shares do not have much significance when comparing the shipbuilding industry across countries because the ship ordering market is inherently highly volatile,” said Woo Jong-hun, a professor of the department of Naval Architecture and Ocean Engineering at Seoul National University.

This, however, does not mean that China will continue to receive less orders and Korea more.

“There may have been a decrease in tanker and bulk carrier orders in the short term, but there are bound to be ups and downs when it comes to such orders,” he said.

“And since in the longer term tankers and bulk carriers are types of ships that are consistently ordered, this is just part of normal ups and downs.”

Woo said more data such as order backlogs, as well as order and shipbuilding tonnages are better to gauge a country’s performance in the industry.

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Order backlogs are an important index because they represent medium- to long-term market share and sustainability, as it takes at least two to three years for a single vessel to be delivered after an order is made. For liquefied natural gas (LNG) carriers, it may take up to five years.

“All things considered, South Korea has a comparative advantage in building higher value ships, and we have been building a lot of LNG carriers, whereas China is ahead of Korea in terms of current order backlogs, which include all kinds of ships and is an index used to compare the relative ranking between shipbuilders,” Woo said.

At the end of last month, the global order backlog was 110.13 million CGT, up 530,000 CGT from the previous month. South Korea accounted for 38.63 million CGT, which is 35 per cent of the total, whereas China accounted for 49.01 million CGT and 45 per cent.

Park Moo-hyun, head of Korean shipping industry research firm TreaBoat Research, said the global volume of ship orders has been rapidly decreasing since October, due to high interest rates and the weak global economic outlook.
Orders in February fell by 25 per cent compared to the same month last year. January’s total was down 63 per cent year on year.

“Looking ahead, China’s dominance is expected in terms of quantity. China’s domestic market, including domestic and international shipping logistics, is so large. Korea’s market conditions are different as it mostly depends on exports,” Woo said.

“Therefore, South Korea should focus on its comparative advantage and further advance its capacity to build high value-added ships through which it can increase profitability instead of competing directly with China with the same type of ships.” (South China Morning Post)