Chinese Shipbuilders Expand Production Amid Market Boom
As the global shipbuilding industry experiences a significant upturn, Chinese shipbuilders are rapidly expanding their production capabilities. This expansion, however, raises concerns about a potential oversupply that could destabilize the market in the future. Recent reports indicate that Zhejiang Xinxinzhou Shipbuilding has initiated the construction of a smart shipyard valued at 1 billion yuan (approximately 210 billion won). Approved by Taizhou city authorities in September, this facility is expected to be completed by June 2027 and will enhance the company’s construction capacity by an additional 300,000 deadweight tons (DWT).
In addition to Zhejiang Xinxinzhou, Hengli Heavy Industry, which acquired the Dalian shipyard from Korea’s STX Group in 2022, has launched a “future factory” project. This initiative includes the completion of two large dry docks in June. Yangzijiang Shipbuilding, ranked fifth globally by order backlog, is also expanding its operations by adding a 300,000-ton-class dock. Furthermore, New Times Shipbuilding received approval in May for the construction of another dock of the same capacity.
Most of these new shipyards are being developed as smart factories, incorporating advanced technologies. For instance, Hudong-Zhonghua Shipbuilding recently unveiled a facility that cost 18 billion yuan (around 3.75 trillion won) and features cutting-edge workspaces utilizing 5G, the Internet of Things (IoT), robotic welding, and big data systems.
Market Dynamics and Future Outlook
The rapid expansion of Chinese shipyards is widening the gap between China’s and South Korea’s shipbuilding industries. According to Clarksons Research, the number of shipyards in China increased from 206 in 2023 to 217 last month, while South Korea maintained only 12 shipyards. China’s share of the global shipbuilding market is also on the rise, climbing from 55.9% in 2022 to 63.8% in 2023, and reaching 69.8% last year.
Despite this growth, industry experts caution that the aggressive expansion of shipbuilding facilities may lead to oversupply. Clarksons Research has indicated that while demand and supply are expected to remain balanced through 2027, the potential for oversupply looms if large-scale expansions continue beyond that year.
In contrast, South Korean shipbuilders are adopting a more cautious approach. Rather than pursuing aggressive investments, they are opting for joint ventures with overseas shipyards to mitigate risks. For example, HD Korea Shipbuilding & Offshore Engineering has partnered with Cochin Shipyard Limited in India, while Samsung Heavy Industries has outsourced the construction of three crude oil carriers to a Vietnamese shipyard.
Lee Eun-chang, a research fellow at the Korea Institute for Industrial Economics & Trade (KIET), noted that if global market conditions worsen and orders decline, South Korean shipbuilders, who face higher production costs than their Chinese counterparts, could be disproportionately affected. As the shipbuilding landscape evolves, the strategies employed by these two nations will play a crucial role in shaping the future of the industry.
