Following the onset of the global financial crisis, the number of active shipyards globally has declined rapidly, reaching 350 as of start April 2018. This trend is most notable in China, where although state interests support state-backed yards, many independent yards have increasingly struggled to win orders. This month’s Shipbuilding Focus takes a look at the impact this has had on Chinese shipbuilding.
Trying To Stay Active
Since the start of 2009, the number of ‘active’ yards (with at least one vessel 1,000+ GT on order) in China has fallen from 391 to reach 112 at the start of April 2018, its lowest level since 2003. This has been the sharpest decline in yard numbers among the ‘big 3’ builder countries, with the number of active yards in Korea and Japan down from 39 to 14 and 70 to 55 respectively in the same period. However, in China the situation has varied between state-backed and other yards (split here according to the ‘builder administration types’ used in the Clarksons Research database). The number of active state-backed yards, comprising the CSSC and CSIC groups, and national government yards controlled by state interests, declined from 52 as of start 2009 to 44 as of start April 2018. In the same period, the number of active independent yards (which make up the majority of other yards) declined sharply from 305 to 50, while the combined number of active joint venture (JV), foreign owned (FO) and local government yards declined from 34 to 18. As a result, state-backed yards accounted for 40% of the active yards in China as of start April 2018, the highest share since 2000, and up from 13% at the start of 2009.
Although total ordering at Chinese yards has declined, state-backed yards have increased their share of contracts, accounting for 59% (255 units of 6.3m CGT) of the total in 2017 in CGT terms, up from 31% in 2009. This increase has been supported by orders from state related interests. In contrast, the share of contracts at independent yards declined from 50% in 2009 to 31% (177 units of 3.4m CGT) in 2017. Meanwhile, consolidation among independent yards has increased. In 2017 two yards, Jiangsu New YZJ and New Times, accounted for 70% of CGT ordered at independent yards, down from over 30 yards in 2009.
Lifting More Of The Weight
Driven by an increasing share of orders, the proportion of the Chinese orderbook represented by state-backed yards has now returned to levels last seen in 2006. Although the overall picture in Chinese shipbuilding is now very different (with the orderbook expanding rapidly before declining by 60% since start 2009), this share has increased from 44% as of start 2009 to 57% as of start April 2018.
So, while the number of active yards in China has declined sharply, the situation varies greatly between state-backed and independent yards. Although state-backed yards have been supported by state related interests, independent yards have generally struggled, with many leaving the market altogether. With the orderbook at independent yards declining rapidly, the prominence of state-backed yards appears to have returned to levels last seen before the financial crisis.