Shipbuilders Relocate to China
The world's shipbuilding industry is shifting to China, thanks to labour costs 10-20 times lower than those in Japan and Korea, and the success of marine engineering industry clusters in the Bohai Bay area and East China.
In 2005, 18% of the world's orders were taken by China, compared with 13% in 2002, and this spiked to 27% in Q1 2006, overtaking Japan. While there are signs of growth in new orders abating elsewhere, as fears of global over-capacity in commercial shipping loom, China has continued to attract new business.
China plans to boost its shipbuilding capacity to 40 million tons by 2010, a three-fold increase over 2005. Chinese yard labour costs as little as US$2 per hour, compared with US$34 in Japan and US$18 in Korea. The repair and maintenance business can only continue its upward trend as China's international trade growth forges ahead.
Korean, Japanese and Singaporean players including Samsung, Kawasaki and Keppel are establishing shipyards in China, lured by the promising market size and growth, low labour costs and the attractions of a lucrative repair and maintenance business.
They will be up against the established state-owned behemoths, China State Shipbuilding Corporation (CSSC) and China Shipbuilding Industry Corporation (CSIC), which hold dominant positions in the East and in the Bohai Bay area, respectively, and account for 55% of industry output.
As well as bringing out their technology, skills and international experience as competitive weapons, foreign entrants will need to collaborate with the technology-hungry industry heavyweights in order to survive and thrive.
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