Shipbuilding Industry: Analysis, Trends & Behaviour – 2018-2020

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The shipbuilding industry has become more global than local due to rapid globalisation and easy to move raw materials, components and finished products across sea routes. Since time immemorial, the shipbuilding industry has been dominated by maritime nations like Britain, France, Germany, USA, Japan, Korea, and China.

The shipbuilding industry is involved in the construction and modification of ships. It takes at least two years to complete the manufacturing of a ship. Presently, commercial shipbuilding sectors are dominated by China, Japan, Korea, European Countries. Shipbuilding is considered to be one of the most strategic, oldest, most open and highly competitive markets in the world.

Challenges Ahead

Although the shipbuilding industry has vast experiences in surviving during peaks and slumps of the economy, the current global economic and political crisis has hit the shipbuilding industry more severely.

Prices for coal, iron ore and crude oil are all likely to remain depressed for the next few years. The expansion of the shipbuilding industry will be affected by increased competition, environmental regulations, enhanced globalisation and political and financial instability.

Advantages Offered by Asian Nations

The shipbuilding industry is accountable for the design and construction of oceangoing vessels all around the globe. As shipbuilding is a highly capital intensive industry so strong government support and political stability is a prerequisite to survive this industry.

The global shipbuilding industry, in the recent past, has been dominated broadly by Asia and particularly by China, South Korea and Japan, due to few distinct advantages. These are cheaper wages, strong government backing and a robust ancillary industry network.

This apart, the middle class is growing in the emerging economies of Asia, where disposable incomes drive growth in demand for imports of commodities and finished goods. One consequence for the maritime sector of a rise in consumer spending in developing markets will be long-term growth opportunities for container ships.

However, shifts in global demographics and population growth rates, coupled with long-term economic growth in developing markets, will have implications for the maritime sector over the course of the next decade.

Forecast for 2018-2020

As most of the developing world is in an economic slowdown, so there will be an extended weakness in commodity prices. The shipbuilding market for tanker and container will grow in the next few years, while the shipbuilding market for bulk carrier has less hope for growth.

The trend in tanker shipping is expected to stay strong in the short term. However, lower oil prices will spur more consumption, the overall global oil demand growth will average just 0.6 per cent per year through 2040.

The excesses in industrial capacity, housing inventory and debt are expected to further dampen China’s domestic demand. While the larger Asian shipyards appear stable, smaller shipyards may be vulnerable, particularly those that specialise in the dry bulk and offshore vessel markets.

Evolving Trends

Some of the noteworthy trends and developments of this industry are green shipbuilding technology, automation in the industry, modular shipbuilding technique, advanced outfitting, ship launching airbag, LNG/LPG fuelled engines and solar and wind powered ships.

To attract the next generation of maritime professionals, shipyards must become more technologically advanced and innovative, and seafarers must learn new skills and integrate new technology.

The key factors which will drive the growth of the shipbuilding market are GDP, global seaborne trade, improved economic growth, rising urbanisation, fuel price, and increase in global steel production.

Opportunities in the Near Future

The geographical distribution of new ship construction has shown strong changes starting from the original dominance of Europe to an increased role for Asian countries such as South Korea, Japan and China. However, on the demand side, purchases are still dominated by European buyers in many segments.

Iran’s oil, adding to the global market is expected to depress already weak oil prices, inflating near-term demand for oil, gas and petroleum products, thereby helping global shipping overall. The tanker shipbuilding industry still expects to neutralise the demand–supply threats and market imbalance by adapting with the changing trends.

All concerns apart, the four major players in the industry – Hyundai Heavy Industries, Mitsubishi Heavy Industries, Daewoo Shipbuilding and Marine Engineering and Samsung Heavy Industries, are expecting a stable growth over the next couple of years.

Short-term Assistance to Act as an Impetus

The expansion of the shipbuilding industry will be affected by an increased competition, environmental regulations, enhanced globalisation and political and financial instability. Besides, newbuilding prices suggest that freight rates will drop further and shipping’s employment problem is critical, because ship and shipbuilding industry is low-tech compared with other industries.

Under such circumstances, government support and subsidy to the shipbuilding industry will be a great help for growth and long term survival of the industry.

An Outlook for the Future

The major factors that will contribute to the growth of the industry include global seaborne trade, growing urbanisation, accelerating economic development, rise in crude steel production and growing demand of eco-friendly ships.

The key trends which are currently observed within the industry include introduction of shipbuilding robotics, ship launching air bags, rising demand of LNG fuelled engines and green shipbuilding technology. However, the industry needs to be watchful of impediments such as cyber breaches, write-downs on existing backlogs and environmental regulations, to lay a sturdy foundation for at least the next decade.

Sea News Feature, December 18