China threatening top spot

Korea’s top spot in the shipbuilding industry for the last 10 years is now under threat and faces strong challenges from China.

Since first reaching the 10 million-ton mark in orders in 2000, shipyards have been in full operation in Korea, the world’s biggest shipbuilder. Now companies have to worry about picking up new contracts, with China sweeping up over half the global market using a low-price strategy that is gradually diverting orders from Korean shipbuilders.

This year so far, China has received 54.3%, or 2.11 million tonnes, of newly placed orders worldwide, while Korea has secured only 31.5%. Should this trend continue, Korea would be dethroned in shipbuilding for the first time since 1998.

What makes matters worse is that Korean makers are likely to further suffer over the coming years as China is now behind Korea only by the smallest of margins. According to data from Clarkson Research, China has 57 million compensated gross tons (CGTs) in backlog of orders, only 1% less than Korea.

Korea overtook the then industrial leader Japan in new orders in 1999 and in overall volumes of building in 2002 and, last year, shipbuilding led the country’s exports valued at $43.2 billion.

But the current economic global slowdown has changed the whole scene. While the markets for new ship orders are stagnating, Chinese shipbuilders have been in hot pursuit of their Korean rivals with the advantages of cheap labour and support from the government.

Conversion to high-valued vessels is the only way for Korea to hold the top spot, industrial experts say. Ships built by China are mostly less lucrative bulk carriers, tankers and container ships. According to analysts, it will still take several more months before orders will be back on track with the recovery of ship-related financing.

“Someday Chinese shipbuilders will surpass Korean ones in volume. Korea needs to have a quality-based strategy to maintain the top spot in the industry,” a spokesman of a local shipbuilder said.