In the last couple of decades there has been a shift in shipbuilding activity from Europe to Asia, where Japan, Korea and China are the most important shipbuilding nations. In the last two decades China has become the world’s most important shipbuilder. This is mainly caused by the building of container vessels and bulk carriers and also increasingly offshore vessels. Whereas European shipbuilding is increasingly focused on passenger ships and leisure yachts.
Source : IHS Fairplay
Reversely, a lack in demand for bulker and container vessels are the main causes of the dramatic decline in Chinese new shipbuilding orders. However, not only the Chinese shipbuilding market has been affected, but other large shipbuilding markets (e.g. Korea, Japan) as well. This means that China remains the world’s main shipbuilder. China is also the country with the largest orderbook.
In general, China is aiming to move away from building ‘simple’ things to more ‘complex’ things. This is also the case in the shipbuilding industry. The country is aiming for a 40% share of worldwide high-end vessel market. Furthermore, it aims to have a 35% of the global offshore market for its shipbuilders by 2020 (source: Lloyds List).
In 2014, the Chinese government published a ‘white list’ of shipyards who are benefitting from prioritized policy support and access to domestic bank loans. In the years after the initial list, several yards have been added and also removed from the white list. The latest alterations were made in 2017 and the white list now contains approximately 70 shipyards of which several yards are focused on shipbuilding for the (international) offshore oil & gas industry. Shipyards on the white list have a prominent position in the Chinese shipbuilding industry. Approximately 90% of all vessels build in China were built at a shipyard on the white list.
There is a proposal to remove yards from this white list if they have not been delivering any vessels, received new orders or started construction on a new vessel for more than a year. Furthermore, a yard could be removed from the list if it declares bankruptcy or merges with or is acquired by another yard. Yards who have been removed from the list are unable to apply again for the next two years.
An increasing population, increasing middle class and risks of conflicts makes that China wants to (partly) supply its own energy in order to be sure of a steady flow. Energy supply could stem from several sources of which offshore oil & gas and offshore wind are part.
The offshore oil & gas industry in China is still in it’s infancy, but progress has been steadily made. Mature Chinese offshore fields are mainly located in the Bohai Sea (near Shanghai), while new developments are mainly aimed at the South Chinese Sea.
After the rapid decline in oil prices after the summer of 2014 to levels (far) below $ 50, oil prices seem to recover slightly in the last months. Currently (November 2017), the Brent oil price stands at a level above $ 60. This makes new developments a little more attractive.
In order to meet environmental goals, China is also moving towards renewables. The country has approximately 170GW of wind power installed, mainly onshore. However, China is increasingly moving towards offshore wind as well. China is aiming to have a total on-grid wind power capacity of more than 210GW by the end of 2020. Offshore wind is expected to exceed 5GW. The above developments are influencing Chinese offshore shipbuilding as well.
There are numerous foreign companies active in the Chinese shipbuilding industry, mainly as a contractor, sub-contractor or supplier. As China is adding more free-trade zones, it becomes more attractive for foreign companies to invest in local presence. Also, the fact that shipbuilding in other parts of the world is decreasing in some segments attracts foreign companies to be active in China. However, there are several points of attention:
With a shift in shipbuilding activity from Europe to Asia in general and China in particular it is vital for companies active in this industry to follow this trend. There are several opportunities for foreign companies to play an active role in the Chinese shipbuilding industry. However, the market is challenging and having good local knowledge and presence are vital. The establishment of collaborations or joint ventures with Chinese companies are good ways to get a foothold.