Rosy outlook for shipbuilders

On 23 October top executives from some 60 shipbuilding companies, including those from major shipyards in Japan, Europe, China, Korea and the United States, gathered in Osaka, Japan, to hold the 12th JECKU Top Executive Meeting hosted by the Japanese delegation.

At the 11th JECKU meeting held last autumn in Korea, pessimistic views dominated in respect of the future of the global shipbuilding market but, immediately thereafter, a major change in the economic environment of the shipbuilding industry took place. The seabourne dry bulk trade showed a significant expansion supported by a brisk steel demand from China while there was strong pressure to advance the phase-out schedule of single-hull tankers.

Thanks to the buoyant shipping market and the low level of interest rates, many shipyards today have full order books. However, shipbuilding prices, though basically showing improvement, are still low compared with the marked upturn in the shipping market. Since shipbuilders serve a single worldwide market and shipbuilding contracts are, in most cases, based on the US dollar, shipyards could suffer a substantial negative impact if their local currencies appreciate relatively to the dollar.

While it is important for shipyard owners to secure sufficient workload in the short-term, it is even more essential to adjust their business plans to the medium and long-term issues affected by shipping and exchange rate trends. Although shipbuilders worldwide compete with one another, the industry should endeavour to develop an environment in which they can compete with one another on a level playing field. As one of the means to achieve it, a new OECD agreement should be formulated to convince every shipbuilder. The participants also recognized the need to jointly address the day-to-day problems they confront in the increasingly complex business environment.