China Reports Recovery in Shipbuilding Volumes in Ongoing Competition

Despite reporting steep declines in the most recent quarter, Chinese shipbuilding is showing signs of recovery, possibly with the aid of the Chinese government, as the shipbuilding industry continues its competition with Korean shipbuilding.

For the first six months of 2020, China reported a nearly 11 percent decline in total volume output at 17.6 million dwt. While it is a steep decline in output, it reflects a recovery during the second quarter as business resumed after the extended Chinese New Year break brought on by the onset of COVID-19. By comparison, in the first three months of 2020, China reported completion of just 7 million dwt, with total volume down by more than a quarter versus the prior year.

Despite the declines in volume, China’s Ministry of Industry and Information Technology highlighted the fact that the volume represented more than a third (37%) of the global shipbuilding market during the period. The Chinese government has been seeking to expand and promote its shipbuilding industry creating a strong competition with Korea as part of its goal to become the world’s largest shipbuilder.

The Chinese ministry highlighted that new shipbuilding orders were up for the first six months of the year. They reported for the six months that orders rose by 3.4 percent from last year to reach nearly 12.5 million dwt. According to the Chinese report, this accounts for 67.5 percent of the market share worldwide.

In the first three months of 2020, despite the growing pandemic, the Chinese ministry reported that the country’s shipbuilders received new orders totaling 4.89 million deadweight tons, up 6.5 percent from a year earlier. Critics however point out the Chinese have been aggressive with their domestic market orders such as the recent announcement for the construction of new bulk carriers to be built by New Dayang Shipbuilding for domestic use.

The total order book for Chinese shipbuilding was reported to have declined by more than six percent in the first half of 2020 to 76.54 million dwt reflecting the impact of the coronavirus with delivery volumes outstripping the orders. By comparison, the order book stood at nearly 80 million dwt at the end of the first quarter of 2020. The Ministry, however, highlighted that the current total order book accounts for nearly half (48.2%) of the global market.

At the same time, the Chinese state-controlled China Shipbuilding Group touted its success managing its business through the pandemic in the first half of 2020. They reported that the group’s total profit had grown by nearly five percent in the first half of 2020.

By comparison, reports indicate that Korea’s shipbuilding industry saw a nearly two-thirds decline in its order book during the first half of 2020. Experts said the decline reflected some of the competition between Chinese and Korean shipbuilders as well the impact of the global decline in new ship orders and specifically in the LNG and offshore segments which hurt Korea’s shipbuilders. Korea, however, at the beginning of June announced that its largest shipbuilders had entered into an agreement with Qatar Petroleum for the construction of possibly more than 100 LNG ships over the next seven years valued at nearly $20 billion.

With the global shipbuilding market continuing to be depressed by the economic slowly, most analysts expect that the competition between China and Korea will further intensify as the major shipbuilders compete for the international shipbuilding orders. While Korea has been working on financial and technical support to its shipbuilding industry, it however does not have the volume of domestic shipbuilding that China has been using to advance the government’s goals for its shipbuilding industry.