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MUTED CELEBRATION 2011 was the year of the highest deliveries ever, yet also the year with the lowest new orders since 2006
Consolidation era Editor Sam Chambers looks at what China’s bloated shipbuilding industry might look like in three years The problem yards in the People’s Republic faced as Lehman Brothers went below the Plimsoll line in late 2008 was a sudden realisation that there were simply too many yards building very basic ships that were suddenly not in demand. The vast majority of China’s yards are still focused on bulkers and tankers — basic ship designs — that are no longer in demand. Two thirds of the tonnage delivered by China in 2011 was bulk carriers. The double whammy for Chinese yards is that with rising fuel prices the Chinese ship designs have been found wanting when it comes to efficiency, one of the supreme demands for hard-pressed shipowners the world over today. The only ships still popular for newbuild orders are high 8
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spec ships such as LNG and vessels for the still booming offshore sector. This is a corner of the market that the Koreans have firmly carved out for themselves with the Chinese a long way behind, lacking technical innovation at present to close the gap. Clarkson says this year’s orders around the world will shrink by 9.7%. Contracts for 1,214 vessels were signed last year, down 48% from 2010, according to Clarkson. The total capacity of vessels ordered in China dropped 58%, Clarkson figures showed. South Korea was able to wrestle back its shipbuilding crown last year, grabbing nearly half of all orders placed in 2011. In 2012 the pattern is likely to be similar — offshore and
LNG remaining rare bright spots, good for the Koreans, while others starve. This urgent need to improve its technological capabilities is not lost on the top executives in China’s shipbuilding sector. President Tan Zuojun of China State Shipbuilding Corporation, the state run umbrella of government backed shipyards in the south of the nation, gave a frank interview on Chinese TV in February in which he warned the nation’s failure to climb the technology ladder would harm shipbuilding in the future. He added that about half of all Chinese yards would be weeded out in the coming three-year slump and 2012 would be the biggest year of consolidation. While there are some 1,526
on the books of the China Association of the National Shipbuilding Industry (CANSI) only approximately 400 of these build ocean-going vessels. According to Shanghai maritime consultant Ben Zhang that figure will be less than 50, with many M&As and others falling by the wayside, by 2015. Greek ship finance specialist George Xiradakis is even more forthright in his consolidation views suggesting the eventual number of yards will be as few as 30 giant merged entities. A glance at the top ten global yards list shows the importance of scale, with Koreans accounting for seven of the top spots. Scale is key in the coming battle for orders. The consolidation in China is already evident. China’s 10 largest builders accounted