Korea Regains Lead in Shipbuilding Market

The Korean shipbuilding industry took more than half of the orders in the global market in the first half of this year, regaining first place three years after it was overtaken by China. 

During the January-June period this year, Korean shipyards secured orders totaling 8.92 million compensated gross tons, far ahead of China's 5.17 million, the Korea Shipbuilders' Association said Sunday. 

That gave Korea a market share of 53.2 percent and China 30.8 percent. CGT values are used to assess the added value of the shipbuilding sector in each country. Japan, another rival, took orders for a mere 460,000 CGTs with a 2.7 percent market share. 

The gap between Korea and China is even wider in money terms, with Korea's orders worth US$31.4 billion, more than three times China's $8.8 billion. 

China overtook Korea in 2008 with heavy government support, and in 2010 racked up orders totaling 18.24 million CGTs as against Korea's 12.65 million. Japan's global market share dropped from 14.9 percent in 2007 to 6.3 percent last year. 

Korean shipbuilders did particularly well given that the entire industry is still in recession. Total worldwide shipbuilding orders were 38 million CGTs in 2010 and 16.77 million CGTs in the first half of this year, compared to a peak of 93.5 million CGTs in 2007. A mere 123, or 20.5 percent, of 600 shipyards worldwide took orders for more than one ship in the first half of this year. 

Hyundai Heavy Industries, Samsung Heavy Industries, and Daewoo Shipbuilding and Marine Engineering performed well because they shifted focus to the high-value added sector rather than competing directly with China, which focuses on building low-end vessels such as bulk carriers and container ships with less than 8,000 TEU with cheap labor based on general-purpose blueprints.

The Korean companies concentrated on drill ships, large container ships of more than 8,000 TEU and LNG carriers, taking all global orders of 21 drill ships, two floating production, storage and offloading units and two LNG-floating storage and regasification unites in the first half. They also made up about 75 percent of all global orders for large container ships of over 8000 TEU with 69. 

Nonetheless, China is expected to overtake Korea again sometime in the future, experts say, pointing to Beijing's massive investment in the market for drill ships and FPSOs. 

Chinese shipyards will not need long to catch up with Korean ones if the Chinese government places orders only with Chinese shipyards for drill ships and FPSOs as it has done for bulk carriers and container ships, they say.