Sumitomo Ends Commercial Shipbuilding as It Looks to Offshore Wind

Sumitomo shipbuilding
Sumitomo Heavy Industries stopped taking new commercial shipbuilding orders as it looks to opportunities in offshore wind and ship repair (Sumitomo)

Published Feb 14, 2024 7:25 PM by The Maritime Executive

In a further demonstration of the stiff competition in shipbuilding and the declining position of the Japanese industry, Sumitomo Heavy Industries Marine & Engineering Company (SHI-ME) reports its board adopted a resolution to withdraw from building new general commercial vessels. One of the oldest shipbuilders in Japan, the company will continue its ship repair business while it also looks to transition to realize opportunities in offshore wind power generation.

“Anticipating the necessity to address the rising prices of steel and other materials and equipment, along with significant fluctuations in vessel prices, and persisting intense competition with overseas companies due to an increasing supply-demand gap, we have extensively deliberated on the future of the shipbuilding business together with SHI-ME,” the company wrote in its statement.

The shipbuilder was spun off in 2003 into an independent company that sought to create its competitive position as a top player in the mid-size tanker market, and specifically focusing on Aframax tankers. They cite the prolonged down cycle for tankers and competition as well as developments such as the 2008 bankruptcy of Lehman Brothers as contributed to the challenges for shipbuilding.

The company implemented various measures, including limiting the number of vessel orders it accepted and overhauling its shipbuilding system, but still, they reported it was challenging to sustain the shipbuilding business. Orders in the last fiscal year were reported at $113 million.

The plan calls for completing the current orders as well as continuing to provide after-sales service for previously constructed vessels and the repair business. As part of the mid-term management plan, they will also work to commercialize opportunities for base structures for offshore wind power generation along with related vessels.

The shipbuilding business traces its origins to 1897 and has operated in its current form since the 1969 merger of Sumitomo Machinery Industries and Uraga Heavy Industries formed Sumitomo Heavy Industries, a machinery and shipbuilding manufacturer. The Yokosuka Shipyard, which has one of the largest docks in Tokyo Bay has operated in its current form since the 1960s.

The company is taking a charge of $5.5 million in the 2023 financial reports for a loss on the business liquidation. They said that revenues would be stabilized by reassigning personnel and other forms of management resource reallocation. The portion of the shipyard used for new construction will be transferred to the Sumitomo Construction Machinery Company which looks to build hydraulic excavators at the site.

Japan’s shipbuilding industry has been in a prolonged decline losing market share to the growing competition first from South Korea and later from China. Today, Japan is a distant third in the industry rankings largely supported by Japanese shipowners who continue to commit a portion of the contracts to the domestic industry.