We have written a few articles recently on China’s intentions to muscle in on the high speed rail industry; on the wind turbine industry; on solar panels; and perhaps most contentiously, in the aerospace industry, with their expressed intent to become major builders of civil aircraft with the C919 project.
So you may not be surprised to hear Beijing is not content with being No. 2 in the world for shipbuilding either.
Just a minute, you may say, I thought China was No. 1! Well, indeed they were, but the South Koreans were not about to roll over and let them take that crown. In recent years, the more technologically savvy South Korean shipbuilders have taken advantage of the rapid shift to LNG, the move to mega-container vessels and other more complex vessels such as offshore oil vessels to regain the No. 1 spot.
According to a Reuters article, orders for capesize dry bulk carriers fell nearly 60 percent year-to-date in June, while demand for LNG tankers surged eleven-fold over the same period. The article cites a recent report from shipbroker Clarksons, and goes on to say they expect the downturn for capesize ships (the largest category of dry bulk vessels and the area in which China excels from a cost point of view) to continue through 2012. A typical LNG tanker costs $200 million, nearly four times more than a capesize vessel apparently.
Analyst Erik Nikolai Stavseth of Artic Securities put it bluntly: “South Koreans are highly advanced in technology, which means that they can tap into high-value vessels such as drill-ships, LNG carriers and container ships[;] China on the other hand has been building these giant bathtubs that are of fairly low complexity. There definitely is a quality difference between China and South Korea.”
The article notes that Korean yards were awarded shipping contracts totaling 8.9 million compensated gross tons (CGT) worth $31.4 billion in the first half of 2011, compared to China’s 5.2 million CGT at $8.8 billion. China, however, intends to catch up and Beijing is urging yards to update dry docks and yard infrastructure to build more complex vessels.
Continued in Part Two.