July 25, 2003


Chinese yards set to increase market share
A new report from U.K. shipping consultants Drewry finds that Chinese shipbuilding capacity is much greater than previous estimates have indicated.

Previous estimates for Chinese capacity in 2000 were 1.4 million CGT (compensated gross tons). But Drewry's assessment for the top 20 yards, based upon current performance is 2.4 million CGT. Taking into account all other facilities, the Drewry assessment is closer to 3.2 million CGT.

However, there is a significant gap between output and capacity, notes Drewry. The report, "CHINA'S SHIPYARDS: Capacity, Competition and Challenges," shows that actual output from the top 20 yards was just less than 1.2 million CGT per annum (average 1999-2001).

By comparison South Korean capacity was assessed at 6.5 million CGT and Japan 7.2 million CGT. China, however, is winning an increasing number of newbuilding orders and there is little doubt that the output will continue to grow.

Capacity development

The growth in shipyard facilities and capabilities is most evident in the development of large docks to handle VLCCs and ULCCs. In 1999 there were two such docks in existence in China that could handle VLCCs - Dalian New Shipyard's 300,000 dwt combined building/repair dock and Shanhaiguan's 300,000 dwt repair dock. By the end of 2002 this had risen to eight docks, with two of these being able to accept ULCCs. The forward program of work will leave China with 12 VLCC/ULCC docks, of which seven are identified as newbuilding docks, two as repair docks, two as combined newbuilding/repair and one for offshore construction.

Competition

The capacity output gap is high in China, allowing the potential for massive growth as utilisation and productivity improves. In comparison to China, there are 17 VLCC/ULCC docks in South Korea, which, with the move of Hyundai Mipo from repair to building, are essentially all newbuilding capacity. On this basis, taken together with the other smaller building docks and facilities there is clearly credibility and substance behind China's objective to win a 16% market share by 2005.

Shiprepair is also a significant and growing sector, and one in which Chinese yards are increasingly becoming recognised not just for their ability to quote low prices for steelwork repairs, but also increasingly their competence in the full range of shiprepair activities. Whilst some of the main shiprepair facilities have sprung up on the back of China's large state owned shipping lines, they are also increasingly active in the international market. The level of conversion activity is also starting to increase and has, notably, included some FPSO conversions at joint venture yards under the guidance of Singaporean investors. The report also provides an insight into the main shiprepair and conversion yards and activity in this important sector.

If growth continues at current levels, Drewry predicts China will increase output to take a possible 16% share of the global market by 2005 and strengthen its position as a leading global force. Competition for fellow nations will increase as new capacity comes onstream.

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