Marine Log

September 27, 2006

Slow speed diesel factory for China

China Shipbuilding Industry Corporation (CSIC), Wartsila and Mitsubishi Heavy Industries (MHI) are establishing a joint venture to manufacture large, low-speed marine engines in China.

CSIC will hold 50% of the joint venture, Wartsila 27% and Mitsubishi 23%. The investment will total around 75 million euros, spread over several years. Production is scheduled to start during the fourth quarter of 2008.

The joint venture will be called Qingdao Qiyao Wartsila MHI Linshan Marine Diesel Co Ltd (QMD). The start-up of the joint venture is subject to final approvals, which are expected to be received by the end of October 2006.

"Our aim is to better serve the shipbuilding industry in China and thereby strengthen our market position in the low speed engines in rapidly growing Chinese shipbuilding market. The QMD factory is a practical demonstration of our strategy of working through partnerships to bring the aspirations of the partners into reality", says Mr Ole Johansson, President and CEO of Wartsila.

"For CSIC, the QMD factory is much more than increased manufacturing capacity. It enables CSIC to further develop the technological capabilities of its ship machinery industry; an objective which is greatly facilitated by international co-operation with strong technological partners such as Wartsila and MHI. Improved technological capabilities will, in turn, also encourage technical innovation among CSIC employees that will raise the competitiveness of Chinese shipbuilding and grow its market share," says Mr Li Chang Yin, President of CSIC.

"Developments such as the QMD factory will raise the reputation of Mitsubishi UE engines in world shipbuilding markets while extending the Mitsubishi UE engine business in an important country that is a rising dragon in shipbuilding. It will also bring more opportunities to offer Mitsubishi UE engines to shipowners in the world," says Mr Hiroo Uchimura, General Manager, Industrial Energy Power Systems Department of MHI.

Strong demand in China

The Chinese shipbuilding industry is growing rapidly and currently requires more engines than can be manufactured locally. As China has set itself the target of being the world's leading shipbuilding country by 2020, demand for low-speed engines is increasing correspondingly. QMD will primarily serve Chinese shipyards, but will also be able to export engines to other shipbuilding markets such as Europe and India.

The QMD joint venture continues the co-operation started by Wartsila and CSIC in 2005 to produce auxiliary engines. With MHI Wartsila is co-operating in the form of a strategic alliance to develop two-stroke marine diesel engines.

The QMD factory will produce large marine engines for Chinese shipyards. It will develop, manufacture and sell a new generation of energy-saving and environmentally-friendly low-speed two-stroke marine engines under license from Wartsila and MHI. The factory will be built in the Shanghai area, where CSIC is setting up a marine industry cluster.

Local supplier network

The QMD factory will use local suppliers as much as possible. It will thus do much to add both to the local economy while channelling the transfer of technology that will support local companies in raising and maintaining their production to world-class standards. The technological importance of QMD factory will also be enhanced through its use by Wartsila and MHI for the research and development testing of new engines, further emphasizing its technological importance.