China claims top spot in shipbuilding

Korean shipbuilders have been overtaken by Chinese competitors for the first time after having dominated the global market for the past 10 years according to Clarkson Research Service in London.

Chinese shipbuilders posted an order backlog volume of 54.96 million compensated gross tonnage (CGT), a figure that outpaced Korea?s 53.62 million CGT, increasing Chinese shipbuilders? global market share to 34.7%, compared to 33.8% for Korea.

Korea has been the world?s largest shipmaker since it beat Japan in February 2000 but Chinese shipbuilders, who have enjoyed massive state support for the industry for the past several years, have increasingly expanded their presence in the global market, winning many orders to produce lower-end vessels.

“It has been argued for a long time that the Chinese shipbuilding industry would soon outpace Korea,” said Song Jae-hak, analyst at Woori Investment & Securities. “Korea?s shipbuilding industry should take this opportunity to turn its eyes to high-end value-added vessels like LNG carriers or floating plants.”

And Korean companies have started to do just that. Han Jang-seop, vice chairman of the Korea Shipbuilders? Association, said the latest trend among Korean companies is focusing increasingly on more profitable vessels while they do not bother spending their resources on cheap, lower-end ships.

“For instance, we do not participate in a deal for a 180,000-ton vessel if it is priced at less than $120 million, but Chinese companies would do that even for $55 million,” Han said. He also downplayed the significance of the latest figures, saying a large portion of the Chinese shipbuilders? orders came from companies within that country rather than from overseas.

According to the Korea Institute for Industrial Economics and Technology, the Chinese government has been using parts of its massive foreign reserves and national wealth to offer major credit support and other financial aid, backed by state-run banks, to the nation?s shipbuilders.

“China?s policies on the shipbuilding industry would boost the sector in the short term but may not be desirable to nurture the industry?s growth over the long term,” said Hong Sung-jin, the institute?s researcher.

The Korean government has announced measures to prevent its shipbuilding and shipping industries from going down by announcing that the investment ceiling of corporate restructuring funds into the shipping industry will be raised from 40 to 60%. The state-run Korea Export-Import Bank will also provide easier credit to shipping and shipbuilding companies if both sectors suffer from a prolonged slump.