As the shipbuilding industry continues its boom, Korean and Chinese shipbuilders are deploying different strategies. Korean shipbuilders are proceeding cautiously with capital spending in case the market turns, while Chinese companies are aggressively expanding investment by building new shipyards one after another.
As of the 30th, Samsung Heavy Industries has accumulated orders for a total of 30 vessels worth $9.6 billion, achieving about 70% of its annual order target. In the merchant ship institutional sector, it booked 28 vessels, including 14 liquefied natural gas (LNG) carriers and six crude oil tankers, totaling $5.2 billion.
HD Korea Shipbuilding & Offshore Engineering has so far won orders for 129 vessels, reaching 64% of its $23.3 billion annual order target. Hanwha Ocean secured orders for 25 vessels worth $4.3 billion, including 15 very large crude carriers (VLCCs) and six LNG carriers.
With the recent boom in shipbuilding driving a sharp increase in orders, Korean shipbuilders' construction facilities are nearing full capacity. According to the Financial Supervisory Service's DART filing system, Hanwha Ocean's facility utilization rate was 99.5% in the first quarter of this year. During the same period, Samsung Heavy Industries and HD Hyundai Heavy Industries recorded utilization rates of 98% and 99.4%, respectively.
Although facility utilization is close to 100%, Korean shipbuilders are not readily moving to invest in facilities. Shipbuilding is a representative cyclical industry, and with the possibility of entering a downturn at any time, companies judge that large-scale capacity expansion carries significant investment risk.
In fact, some in the industry recently forecast that shipbuilding could soon enter a correction phase. Lee Eun-chang, a research fellow at the Korea Institute for Industrial Economics & Trade (KIET), said, "There have been many orders for eco-friendly ships over the past three years, but it is hard to see this super-strong market continuing," adding, "In the long term, the market could be favorable due to environmental regulations, but in the short term, a correction is possible."
By contrast, China, which has booked 816 vessels through this month to rank No. 1 in global order share, is significantly expanding its production capacity.
In May last year, Hudong–Zhonghua Shipbuilding of state-run China State Shipbuilding Corp. (CSSC) completed a new 431.8-hectare (ha) shipyard on Changxing Island in Shanghai. According to maritime outlet PortNews, Hudong–Zhonghua Shipbuilding invested about 18 billion yuan (about 4.0088 trillion won) to build the yard.
PortNews reported, "Once the shipyard is fully operational, it will have the capacity to build six special-purpose vessels annually, and LNG carrier output will increase from six per year to more than 10."
Shanghai plans to invest 120 billion yuan by next year in Changxing Island, where the shipyard is located, to develop it into a shipbuilding and offshore industrial complex and raise annual production of large LNG carriers to 18.
Hengli Heavy Industries, which acquired the former STX Group's Dalian shipyard in 2022, is also expanding production capacity through large-scale facility investment.
In 2024, Hengli Heavy Industries announced a plan to invest 9.2 billion yuan to raise its annual construction capacity to 7.1 million tons. After expanding capacity, Hengli Heavy Industries held a completion ceremony last year for its "Future Factory" for building VLCCs, LNG and LPG carriers, and container ships.
The Chinese government has also designated shipbuilding as a strategic industry, backing investments to expand output and advance technology at shipbuilders. China has adopted the "build domestic for domestic demand" principle and has spared no support for shipbuilding. Chinese banks reportedly lend up to 95% of a vessel's price when a domestic corporation places an order with a domestic shipyard.
In Korea, there is growing concern that if shipbuilders continue to hesitate on additional facility investment, their production capacity will soon lag far behind China's. Sluggish capital spending is also likely to be linked to a narrowing of the technology gap.
Most of the docks (dock—ship construction sites) at Korean shipbuilders were built before the 1990s. Aside from Hanwha Ocean, which is building one floating dock slated to go online next year, new facility investment has effectively stalled. Shipbuilders that are not increasing production facilities are using overseas production bases such as the Philippines to manufacture standard ships, while focusing on high value-added shipbuilding at home.
An industry official said, "For shipbuilders to expand investment in Korea, the environment fundamentally needs to be set so they are less affected by global market fluctuations," adding, "Like China's 'build domestic for domestic demand' principle, Korea should consider policies that provide incentives to shipping companies that place orders with domestic shipbuilders."