5060
Views

China Forecasts Beginning of Shipbuilding Boom

China forecasts shipbuilding upcycle
CSSC's Shanghai shipyard (file photo)

Published Aug 17, 2021 3:46 PM by The Maritime Executive

Chinese officials are forecasting that the strong growth in shipbuilding orders experienced in the first half of 2021 will continue for the remainder of the year. Speaking about the outlook for the shipbuilding industry they speculated that the industry has entered a new high-growth phase as owners seek to adapt to new regulations. They said China is well-positioned due to its work on new technologies and advanced manufacturing techniques.

"There will be many orders in the second half (2021), and global annual new ship transaction volume will definitely exceed 90 million dwt," forecast said Li Yanqing, secretary-general for the Chinese Association for the National Shipbuilding Industry (CANSI). "Therefore, we have reason to believe that a new shipbuilding cycle has begun."

Supporting their belief that the 10-year downturn in shipbuilding is being reversed, CANSI pointed to the strength of data indicators such as the Baltic Dry Bulk Index, which recorded a strong increase in rates and the strong growth in freight rates for containers.

CANSI reported that the country’s shipbuilders received orders for 28.39 million dwt so far in 2021, which amounted to more than 40 percent of the total orders placed during the period. They said Chinese yards delivered 23.18 million dwt in the first half of 2021 both for domestic and international shipowners, which was more than 47 percent of the total ships delivered in 2021. 

With the rate of orders exceeding production, the Chinese shipbuilding industry is also building its orderbook and backlog. Orders exceeded deliveries by 210,000 dwt in the first half of 2021. The total for all the executed orders currently stands at 80.96 million dwt.

China State Shipbuilding Corp. (CSSC) highlighted the dramatic growth in orders for containerships. “Our orders for container vessels, especially those for 16,000- and 17,000-TEU ships, doubled compared with the same period last year," said Zheng Wei, vice-president of CSSC-Dalian Shipbuilding Industry Co. CSSC highlighted that containership orders so far in 2021 have matched the number of vessels ordered for the whole of last year, while COSCO highlighted orders for more than 20 bulkers and container vessels it received for its joint venture with Japan’s Kawasaki Heavy Industries. COSCO said that its production capacity is full to the beginning of 2024.

China's shipbuilding industry has been adopting new technologies the organization noted pointing to the need for a green transformation in the shipping industry. They highlighted efforts with alternative fuels, including engines powered by ammonia, liquefied natural gas, methanol, and hydrogen, as well as advanced manufacturing techniques. The Chinese officials said that the country is growing its role in high-end ships with advanced technologies. “This will provide China's shipbuilding industry an opportunity to change lanes and overtake competitors in the global market,” Chen Jun, president of Shanghai-based CSSC Hudong-Zhonghua Shipbuilding.

However, like the global shipbuilding industry, the Chinese companies pointed to the rising price of steel as the biggest challenge in the near term and one that has had a dramatic impact on profitability in 2021. Steel, which accounts for more than 20 percent of total shipbuilding costs, is the costliest component in the construction process, they said, citing a 50 percent increase in cost in 2021. COSCO reported that it has been negotiating the price of steel quarterly since October 2020.

CANSI forecast a strong future saying that the shipping industry is focusing on smart vessels and automation creating opportunities for more high-end ships.