Further Thoughts on The Newbuilding Markets Long Term Trends

We all know that the big three Asian shipbuilding nations dominate the shipbuilding markets these days. On their several paths over the last 70 years, China, Japan and South Korea have taken advantage of domestic industrialisation, growing international trade, cheap labour and government support (through direct investment, tax breaks or other means) to develop their shipbuilding industries.

But not all three of these countries cater mostly for domestic ship owners.  And a number of smaller shipbuilding countries have maintained viable shipbuilding industries through legislation designed to encourage domestic ship owners to contract with domestic ship yards.

We wanted to put some numbers onto this to see which countries make up the league table of building ships for domestic customers.

Using data from 2000 to 2019, we identified wherever possible the domicile of the owners receiving newbuildings. We didn’t use the flag state as so many ships sail under flags of convenience. A Greek owner taking delivery of a ship registered in Panama or Liberia is still for our purpose a Greek owner.  Shipping is designed to disguise the beneficial owner of a vessel, so this isn’t always possible. In many cases we have to take educated guesses based on experience, management company domiciles, or previous identified deliveries. So there is bound to be a margin of error in this sort of analysis.

Then we added up the gross tonnage (not the Compensated Gross Tonnage as we were interested in the simple volume of tonnage without adjusting that datum for ship type) for each national domicile. We could then arrange those countries into a league table of “who took delivery of the most new ships between 2000 and 2019”. No prices for guessing that China domiciled owners took delivery of the most new tonnage in the years 2000 to 2019.  Singapore came second which reflects the city state’s increasing position in the shipping industry over the last two decades.  Greece was third, followed by Japan and the USA. A cluster of Europeans – Germany, Norway, Denmark and the Netherlands in 6th ,7th ,8th and 10th position were interrupted by South Korea in 9th.

Our next step was to assess the percentage of ships that were built domestically for each of those ship owner domiciles. China (again no surprise) pursues a Made-in-China approach for ships with a tariff of over 20% on “imported” ships. Consequently, 88% of newbuildings delivered to Chinese domiciled owners in this period were built by Chinese ship yards.  That doesn’t mean that 88% of Chinese yards’ output was for domestic owners – in fact that figure is just 28% of output. In other words, Chinese owners build in China but non-Chinese owners build in China more.

Singapore by comparison has limited space for ship yards, though high quality vessels including specialist aluminium hull types deliver from the Lion City. So only 4% of ships delivering to Singapore based owners in 2000 to 2019 were built in Singapore. China was the biggest single supplier of ships to Singaporean owners, many of which are subsidiaries or affiliates or project partners of Chinese companies.

Greek ship yards delivered only one per cent of ships to Greek ship owners in this period; their main supplier was South Korea.  Japanese owners ordered 88% of their ships from Japanese ship yards, as one might expect as tax rules give allowances for owners reinvesting in replacement tonnage from Japanese yards. 

US-domiciled owners ordered 41% of their ships from US ship builders, so American owners build overseas despite the Jones Act. But 80% of US ship yard output was for US owners, so you can see how the Jones Act makes US shipyards uncompetitive internationally.

The decline of European shipbuilding has meant that only 7% of ships delivered to German owners were built in Germany during these two decades, despite the boom in the KG system in the first decade at least. However, German owners represented 15% of German ship yards’ custom in our 20 year period.

Danish ship owners ordered only 3% of their new tonnage from Danish ship yards but that represented 78% of Danish ship yard output.  Norwegian ship owners ordered 8% of their new tonnage from Norwegian yards, which was 48% of Norwegian shipbuilding output. German and Norwegian owners preferred Chinese ship yards; the Danes preferred South Korean yards.

South Korean owners as you might expect, order from South Korean yards, but only 46% of the time – about half the rate in China and Japan. The South Korean Shipbuilders’ Association may take pride in being the most ‘free trade’ of the Asian shipbuilding national industries. Exports make a larger share of Korean output than in China or Japan as domestic customers represented only 7% of South Korean ship builders’ business.

The recent Qatar block booking of Korean berths makes plain their attractiveness to overseas buyers.  Nonetheless, the Seoul government has had to step in on several occasions in the period in question to assist with restructuring finances and operations.

So much for the recent past, but what of the future? Automation and interconnectedness are accelerating trends in all forms of transport and manufacture, with shipbuilding being no exception. The advantage given by cheap labour is diminishing.  China’s Made in China 2025 policy reflects this as the nation tries to ensure that three quarters of hi-tech components going into planes, ships, trains and road vehicles are made in China.

Will European ship builders be able to resurrect some trade, either domestic or export, by leveraging their hi-tech credentials? The depressing answer is probably not, without greater governmental support for industrial clusters to support and create regional markets for ships. But western governments have had their fingers burned supporting industry over the last 40 years and laissez-faire, monetarist ideology curses all forms of state intervention.  To Asia then for our next generations of high tech, multi fuel vessels, just as soon as we are allowed back onto aeroplanes.

Shipbuilding Domestic Preference, 2000-2019

Ranking by Ownership of New Ships Ship Owner Domicile% of Ships Built Domestically,Most Common Country for ShipbuildingDomestic Customer Share of Ship Yard Output, %
3Greece1%Korea, Southn/a
8Denmark3%Korea, South78%
9Korea, South46%Korea, South7%

Source: Shipping Strategy Ltd.