As the global shipbuilding market enters a boom, Chinese shipbuilders are expanding production facilities one after another. The industry warns this could lead to an oversupply that may strain the shipbuilding market again in the future.
According to the shipbuilding industry and foreign media on the 19th, Chinese shipbuilder Zhejiang Xinxinzhou Shipbuilding this month began building a smart shipyard worth 1 billion yuan (about 210 billion won). Approved by the Taizhou city authorities in Sept., the project is slated for completion in June 2027 as planned and will increase construction capacity by 300,000 DWT (deadweight tonnage).
Hengli Heavy Industry of China, which acquired the Dalian shipyard from Korea's STX Group in 2022, launched a "future factory" project early this year and completed two large dry docks (dock, shipbuilding facilities) in June.
Yangzijiang Shipbuilding of China, the world's No. 5 shipbuilder by order backlog, began adding a 300,000-ton-class dock in the second half of last year. Another Chinese shipbuilder, New Times Shipbuilding, also won approval in May for new construction of a 300,000-ton-class dock.
Most of the new Chinese shipyards are being built as smart factories. The shipyard that Hudong-Zhonghua Shipbuilding completed and unveiled in May after spending 18 billion yuan (about 3.75 trillion won) is said to feature advanced workspaces based on 5G, Internet of Things (IoT), robotic welding, and big data systems.
As Chinese shipbuilders move to expand facilities in succession, the scale gap between China's and Korea's shipbuilding industries is widening. According to Clarksons Research, the number of shipyards in China rose from 206 in 2023 to 217 last month. Korea had 12 shipyards as of last month.
China's share in the global shipbuilding market is also growing. Clarksons Research said China's global ship order share has continued to rise, from 55.9% in 2022 to 63.8% in 2023 and 69.8% last year.
However, given the volatile nature of shipbuilding, industry voices say the facility expansions by Chinese companies are likely to lead to oversupply. Clarksons Research said, "Demand and supply will be balanced through 2027," but added, "If large-scale new shipyard expansions continue, oversupply could emerge after 2028."
In response, Korean shipbuilders are deploying a different strategy from China. Rather than making aggressive direct investments, they are spreading risk through joint ventures with overseas shipyards. HD Korea Shipbuilding & Offshore Engineering, in expanding into India, worked with Cochin Shipyard Limited, the country's largest state-run shipyard, and Samsung Heavy Industries outsourced construction of three crude oil carriers ordered in Liberia, Africa, in Oct. to a Vietnamese shipyard.
Lee Eun-chang, a research fellow at the Korea Institute for Industrial Economics & Trade (KIET), said, "If market conditions in the global shipbuilding industry deteriorate and orders decline, Korean shipbuilders, whose production costs are higher than China's, will take a bigger hit."