Far East shipyard support may hurt industry

Chinese and South Korean support for shipbuilders may hurt the industry in the long term by keeping unprofitable yards afloat amid plunging demand, according to Drewry Shipping Consultants Ltd.

“There?s absolutely no sign that world shipbuilding capacity is going to be rationalized,” Managing Director Arjun Batra said at a shipping conference in Singapore recently. “I don?t see China or Korea, for that matter, allowing the yards to go down.”

China and South Korea, the world?s two largest shipbuilding nations, have both introduced measures this year to help yards cope with customers delaying or scrapping orders amid slower trade. Shipyards may enter a global price war next year because of South Korea discounting, Mitsui Engineering & Shipbuilding Co., Japan?s second-largest shipbuilder, said last month.

“We?ll have a long-term problem on the supply side unless the shipbuilding capacity is rationalised,” said Batra. “That can only be done by pure economics, closing down inefficient shipyards.”

China in June announced a two-year plan to help shipbuilders, including funding for cash-strapped producers and moves to encourage mergers and acquisitions. In April, South Korea unveiled an 11.5 trillion won ($13.6 billion) financing package to help shipowners pay for new and existing orders.