Shipyards risk global price war

Shipbuilders may be drawn into a global price war next year triggered by South Korean discounting, an executive at Mitsui Engineering & Shipbuilding (MES), Japan?s second-largest builder of vessels, said.

According to Norio Nagata, head of the company?s ship and ocean project division, “A risk of some new Korean yards setting very low prices is our biggest concern.” The possible price cuts to fill idle shipyards could lead to global discounting, he said.

Many shipping lines have postponed or cancelled vessels as demand dropped amid the recession. Bulk carrier prices have declined as much as 30% from levels before the economic slump and a global fleet oversupply may continue for six years, boosted by the expansion of Korean and Chinese yard capacity and weak demand, Nagata said.

“Things will be extremely tough until 2015,” he said. “The most important thing is how quickly we will respond to a rapid change in the business environment.” MES will compete with Asian rivals by developing more fuel-efficient ships and plans to sell, as early as 2013, very large crude carriers, or VLCC, and Handymax vessels designed to cut greenhouse gas emissions by 30%.