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Korea Can Hardly Overtake China in Shipbuilding Market Share, Report Says

The Korean shipbuilding industry did not land one single container ship order in the first quarter.

Korea’s shipbuilding industry is closing in on China’s market share by 3 percentage points in the first quarter with its “selective ordering” strategy of pursuing high-value-added vessels such as liquefied natural gas (LNG) carriers. But experts point out that it is impossible for Korea to surpass China due to China’s strong shipbuilding competitiveness.

“China has a larger shipbuilding capacity than Korea,” the Export-Import Bank of Korea’s Overseas Economic Research Institute analyzed in its recent first-quarter shipping and shipbuilding report. “It is virtually impossible for Korea to surpass China in terms of market share as China is gradually increasing its share by placing more shipbuilding orders with Chinese shipbuilders, encroaching on the medium-sized ship market previously led by Japan and expanding its sales activities to receive orders for large ships.”

“It is even more important for Korea to maintain its production capacity, competitiveness, and quality management as well as its ability to create added value as a pillar of the national economy, and to consolidate its position as one of the world’s leading shipbuilding powerhouse,” the report said. “The Korean shipbuilding industry needs to make efforts to fix problems such as orders concentrated on a few ship types and difficulties in stabilizing its shipbuilding system by addressing a labor shortage.”

Many insiders of the Korean shipbuilding industry point out that while China has relied on waging a price war in the world shipbuilding market in the past, it has recently begun to scale up its technological power.

China is also increasingly diversifying its target markets, ordering a range of vessel types from large to small and medium-sized. The institute noted that China is also gradually expanding its presence in the large ship market, having won the only large container ship order in the first quarter. A Japanese client placed the order for 12 13,000-TEU container ships.

China currently holds the top spot in the global shipbuilding market. Of the global new shipbuilding orders for 10.34 million CGT in the first quarter, China claimed the top spot with orders of about 4.87 million CGT, accounting for 47.1 percent of the total, according to British shipbuilding and shipping analysis organization Clarkson Research.

During this period, Korea came in second with 4.49 million CGT and 43.4 percent, trailing China by 3.7 percentage points. Compared to the same period of last year, Korea saw a 32.9 percent increase in order volume. The order value rose 41.4 percent to US$13.57 billion. The amount was the third-largest quarterly total in the past decade.

Korea’s strong performance was driven by winning all 29 units of the second batch of Qatar’s LNG carrier project orders and increasing its share in the very large ammonia carrier (VLAC) market despite a decline in global ship orders in the first quarter. Taking orders for eight very large crude carriers (VLCCs) also had a positive impact. Korean shipbuilders failed to take any order for VLCCs last year due to China’s price war.

In detail, LNG carriers accounted for 55.4 percent, the highest, of the orders that Korean shipbuilders took in the first quarter. In addition, 25 LPG carriers were ordered from Korea, including those that can double as 20 VLACs. They accounted for 21.8 percent of total orders.

However, in the first quarter, Korean shipbuilders could not land orders for container ships, which are considered one of the most important and lucrative ship types for the Korean shipbuilding industry. “While it is positive that Korean shipbuilders fared well in taking orders in the first quarter, it is somewhat anomalous that orders for LNG carriers and LPG carriers, which account for a small percentage in the world shipping market, accounted for 77 percent while taking orders for tankers only among the three major ship types. Orders for tankers accounted for only 20 percent of the total orders placed with Korean shipbuilders,” the institute said.
Source: Business Korea

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