Protectionism in shipbuilding spreading

Shipbuilding protectionism at compatriot shipyards is abruptly spreading around the world particularly in developing countries such as Brazil, Russia, India, China, Vietnam and Qatar.

Brazil has limited the bidders to domestic shipyards for a state-owned oil company’s fleet expansion newbuilding program of 49 ships worth $5bn since 2005. The protectionism has also been applied to the offshore sector and the government encouraged owners to place orders for 100 offshore units including rigs and drillships at Brazilian yards and ensured charter contracts for those newbuilding orders. Consequently, the revenue of Brazilian shipbuilding industry for 2009 is expected to reach $9bn, up 50% against a year earlier. Government investment in shipbuilding is also forecast to amount to BRL 10bn ($4.4bn) this year.

Russia has been energetically protecting and fostering its shipbuilding industry. The country plans to increase its shipbuilding capacity by 120% in 2015 against 2005 and construct yard facilities capable of building 200,000 DWT ships to become one of the top 10 shipbuilding nations in the world. To this end, Russia launched the state-owned shipbuilding group United Shipbuilding Co (OSK) in 2007.

China began shipbuilding protectionism ten years ago and now almost all Chinese shipowners are building their ships at Chinese shipyards. Even the owners in Hong Kong are mostly placing newbuilding orders at Chinese yards.

India is also supporting its shipbuilding industry by introducing subsidy and incentive programs to enhance the industry’s competitiveness, and Vietnam and Qatar are also participating in the protectionism.

In this situation, South Korea, which is the leading the world shipbuilding nation, now needs to come up with strategic approach rather than simply cultivating overseas markets. South Korean shipbuilding insiders say they need to create a new business model such as the sale of technology including shipyard facilities and ship designs.