EDITORIAL COMMENT Gone fishing


Too many fishermen, not enough fish. The shipbuilding industry is about to undergo a sea-change as forced restructuring takes place


industry with yours truly and some of his colleagues. On their departure it was noted that


A


the probable reason for the visit, aside from the obvious pleasantries, was as a fishing expedition, for information that is, on the likely development of the world’s shipbuilding industry. It is not that RINA has a handle on the


global economy that the Koreans made this trip to ask our view, it is more a feature of the unpredictability of the market that has helped to stall any revival in the industry and a mark of the confusion and concern as to how the future may play out. In this month’s issue this conundrum is


discussed at length. South Korean yards have been severely hit by the collapse in orders and their response has been for the larger yards to shiſt production into the offshore market. Smaller yards are looking to move into the building of more sophisticated ships. Many yards in Korea and Japan have


abandoned the bulk carrier market altogether, concluding that these ships are comparatively easy to build and the Chinese yards, which can offer significantly lower prices as a result of lower labour costs, should be leſt to build these ships. One Korean yard, Sungdong which is in


serious financial difficulties, complained that the Chinese yards were contracting bulk carriers at around 20% below cost price, forcing Koreans to pursue even greater improved productivity in an attempt to compete.


The Naval Architect October 2012


small delegation of South Koreans came to London recently to discuss the state of the shipbuilding


Analysis of the state of the shipbuilding


industry in China reveals that the yards there are not in any better shape and some are considerably worse off when compared to their competitors in Japan and Korea. It is not that China’s yards are not


growing, it is apparent that many have stopped trading altogether and many others are looking to consolidate. The larger state owned yards have managed to survive, it is the medium sized yards where the pressure is really acute, not just in China, but in every shipbuilding country. Medium and small yards do not have the


capability to adapt in the way that larger builders can, in Korea the major yards have switched production to offshore, in Japan Mistubishi Heavy Industries has stopped production of ships at its Kobe yard and is looking at producing machinery for nuclear power stations. Options such as these are not open to


the smaller yards, but there are national differences. In Japan, IHI and Universal have tied the knot in a deal which will see the two yards merge into a single company. Japan’s yards build primarily for the


domestic market, however, and in South Korea and China the industry is geared towards exports. As the crisis has deepened and the scale of the over-ordering that the industry engaged in before the global economic crisis hit becomes clear,


the


medium and small yards in both China and Korea have looked for new orders to maintain their orderbooks, but they are fishing in an ever-diminishing pond. Yard over-capacity is reaching a tipping


point now with the Chinese yards and Koreans both looking to build gas carriers


and offshore vessels in an effort to keep body and soul together. Clearly there are not enough fish in this


particular pond for all the yards currently fishing for orders, the sea is not only getting smaller, but there appears to be almost as many fishermen still trying to feed from it. Something will have to give. In South


Korea that something has been the collapse of a number of yards, 21st Century, Shina SB and Sungdong, to name three. Significant numbers of yards in China have also lost their battle for survival. In the past whenever there has been


a decline in ordering the yards have dropped prices and orders have flowed again. Today that is unlikely to happen as the banks are reluctant to lend to such a capricious industry as shipping. And with overcapacity remaining a problem finding cargo for new ships will be a challenge. So even though yard prices are at rock


bottom owners are not ordering. For the yards the one bright spot on the horizon is that as regulations change new designs have become necessary and as the industry (slowly) replaces older tonnage with more fuel efficient modern ships so a two-tier market may develop, which could in itself create demand. Tat demand will necessarily have to


be boosted by a turnaround in the global economic markets for the change to happen with any urgency. Some observers believe that the economic crisis will change by the end of 2013, other predict that 2014 will be even worse than 2013. Te truth is the future is more uncertain


today than it’s ever been. And no amount of fishing will provide the answers to this billion dollar question. NA


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