Manufacturing News

Chinese shipbuilders grab bigger market share in financial crisis, weakness remains

Thanks to cheap labor and technological innovation, major Chinese shipbuilders have survived the financial crisis which led to a dearth of orders in 2009.

Figures from a top shipping research company showed China has overtaken the Republic of Korea (ROK) as the world's largest shipbuilding nation as Chinese shipbuilders outpaced ROK competitors in both new orders and orders in hand.

Statistics released on Jan. 12 by the London-based Clarkson PLC, the world's leading shipping service provider, showed that only 28.8 million deadweight tonnages (DWT) of ships were ordered globally from January to November in 2009. In 2007, the peak of the shipping boom, new ship orders totaled 272 million DWTs.

However, China's share of the diminishing market has grown significantly since 2009.


On Sunday, China's largest self-developed oil tanker left its home of 22 months in Guangzhou, capital of south China's Guangdong Province, and began its maiden trip to Saudi Arabia.

The 333-meter-long, 60-meter-wide oil Xinpuyang can carry up to 308,000 tonnes of crude oil, and hit a speed of 15.7 knots (equal to 30 km per hour).

Equipped with satellite navigation, radar and monitoring alarm systems, the supertanker has a crew of 24.

Chen Liping, manager of the builder, the Longxue Shipyard, told Xinhua that Longxue would be building another three highly-automated tankers for China Shipping (Group) Company.

Chen said the supertanker marked a big step forward in technological innovation and high value-added production by Longxue Shipyard and its owner China State Shipbuilding Corporation (CSSC).

The Shanghai-based CSSC, whose turf is mainly in eastern and southern China, is one of China's two leading state-owned shipbuilders.

Also Sunday, the other leading state-owned shipbuilder, China Shipbuilding Industry Corporation (CSIC), said profits in 2009 jumped 18.5 percent to 7.39 billion yuan (1.1 billion U.S. dollars).

The Beijing-based conglomerate, whose shipyards are mainly in northern China, said operating incomes rose 17 percent to 120.9 billion yuan.


CSIC General manager, Li Changyin, said the CSIC had minimized the impact of the global financial crisis, which crippled the global sea-based trade and slashed demand for ships, through technological innovation.

"The worse the (economic) downturn is, the more important the technological innovation is," Li said.

With innovation and improved design, CSIC shipyards were able to develop new products, including 180,000-DWT bulk carriers, 320,000-DWT oil tankers, 13,000-TEU containers as well as new types of drilling platforms that could be used in waters up to 400 feet (120 meters), said Li.

Li said the CSIC profit target for 2010 was 8 billion yuan. The operating income was expected to surpass 140 billion yuan and CSIC output in 2010 was likely to break 10 million DWTs.

Tan Zuojun, CSSC general manager, told Xinhua that CSSC had invested more than 1.64 billion yuan into research and development in 2009 and stepped up efforts to develop high value-added ships.

Tan said technological innovation had significantly contributed to CSSC's successes in the global fight for orders.

For instance, the application of the latest version of a self-developed 3D ship product design system since last August at CSSC's Hudong Shipyard had helped boost coordination and integration between ship design institutes and shipbuilding entities, according to Tan.

The CSSC delivered 170 ships in 2009, he said. Its completed output last year broke the 10-million mark for the first time to reach 10.8 million DWTs, an increase of 27 percent from a year earlier.

CSSC's global market share stood at 9.1 percent, making it the world's second largest shipbuilder in terms of DWT, after Hyundai Heavy Industries of the Republic of Korea, he said.

Tan said technological innovation had also played a decisive role in helping China narrow gap with the ROK and Japan at both fronts of ship design capability and shipbuilding efficiency.

Without innovation, the CSSC would not have been capable of designing and building state-of-the-art LNG carriers in the last two years, he said.


Figures released by the Ministry of Industry and Information Technology (MIIT) showed combined delivery by China's shipbuilders jumped 47 percent last year to 42.4 million DWTs, 34.8 percent of the world's total.

That represented an increase of 5.3 percentage points in global market share from 2008.

China's shipbuilders received 26 million DWTs of new orders last year, down 55 percent from a year earlier, according to MIIT figures.

But MIIT figures showed China took 61.6 percent of new orders worldwide in 2009, much higher than that of the ROK, which is home to seven of the world's top 10 shipbuilders.

For the first time, China overtook the ROK as world's largest shipbuilding nation in new orders, measured by both DWT and compensated gross tonnes (CGT). CGT is normally used in the shipbuilding industry for international comparison since it contains added value.

According to Clarkson PLC, ROK shipbuilders won a total 3.15 million CGTs in new orders last year, which accounted for 40.1 percent of all new global orders.

Chinese shipbuilders seized 3.49 CGTs in 2009, accounting for 44.4 percent of the world's total.

On the order backlog, the ROK shipbuilders had a total of 52.83 CGTs as of early this month, while the Chinese rivals had 53.22 million CGTs, according to Clarkson.

Chinese officials and industry analysts had played down the position change. They said China was likely to drop from the top position when the world trade recovered and ship orders rose.

Chinese shipbuilders outpaced ROK competitors in both new orders and order backlogs, but in terms of comprehensive competitiveness, the ROK was still ahead of China, Tan said.

Chinese shipbuilders fell far behind their ROK competitors in design and building capacities of high-tech and high value-added ships, such as the LNG carriers, Tan added.

Global market share of Chinese-built high value-added ships was just around 10 percent by December of 2009, he said.

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