The China State Shipbuilding Corporation (CSSC) and China Shipbuilding Industry Corp (CSIC), the conglomerates in charge of most of the country’s shipyards, plan to reach the summit of world shipbuilding by 2015 through shipyard modernisation and increased efficiency and rationalisation.
China’s leaders are confident that the country can overtake Asian shipbuilding rivals Korea and Japan by 2015. Indicating the explosive growth of Chinese shipbuilding, its overall share in the world shipbuilding market has jumped almost three-fold at 16.5% compared to just 5.2% in 2003. Chinese-built vessels are today sold to 40 countries on all five continents, and include some of the world’s most prestigious shipping companies.
Already impressive, such growth may be dwarfed in coming years as China has declared its goal of becoming lead shipbuilding nation by 2015. China’s two main shipyard groups (CSSC and CSIC) have adopted different growth strategies in their efforts to add large containerships, VLCCs, ro-ro vessels, FPSOs and more recently, LNGs to their portfolios.
The southerly CSSC’s ambitious plan has been to expand its current 4m dwt capacity to over 14m dwt by 2015. Its most modern and advanced yard, the Shanghai Waigaoqiao Shipbuilding (SWS) finished its first ship in summer 2003, delivered just over 1.2m dwt in 2004, growing to an annual output of 2.2m dwt by 2006 and 2.6m dwt by 2008.
“We are currently concentrating on three vessel types: capesize bulkers, 105,000dwt aframax tankers and FPSOs of 105,000dwt to 300,000dwt,” says Qi Ya Xian, deputy director of SWS’ sales and marketing department. “The next step will be to build VLCCs and containerships.”
World’s biggest shipyard
Along with other major developments, the CSSC group is scheduled to build the world’s biggest single yard at Chanxing Island, allowing it to become the world’s number one shipbuilder by 2015.
“The first phase will involve the relocation of Jiangnan shipyard in 2007, when the new development and the 7.5km tunnel linking it to Shanghai will be completed,” says Hu Keyi, technical director at Jiangnan. “The second phase will involve the development of a new shipyard in the Guangzhou area plus the expansion of other CSSC shipyards, and total capacity is intended to reach 12m dwt.” Jiangnan, presently limited by its site to the production of panamax bulk carriers, LPG and chemical carriers, will move into larger deadweight vessels at its new premises.
Meanwhile, the CSIC has a two-fold plan to raise capacity to 6m dwt and output to 5m dwt by 2010; and to around 9m dwt and 8m dwt by 2015. This will be achieved by additional drydocks at Dalian, Dalian New (ULCC size) and Bohai, and completion of the new yard in Qingdao with a projected four VLCC docks and output of 2m dwt.
“Over the past few years, important milestones have been passed with completion of the country’s first ever VLCCs built here at Dalian New Shipbuilding (DNS) for NITC,” says DNS president Paul Sun Bo. “These vessels, together with deliveries at other state-of-the-art yards, show that Chinese-built vessels are becoming internationally competitive in terms of quality, performance, build time, as well as cost.”
At DNS, quality is being encouraged by linking salary payments to satisfactory completion of each block construction. Mr Sun Bo sees it as a way of encouraging productivity; “it’s difficult to control the workers if they get paid whether they work or not,” he says. He has also divided the slipway and drydocks workers into two competing teams, which has helped speed up construction.
This use of a bonus system indicates how far and how fast the market economy is developing, but Mr Sun Bo is quick to point out that if China is to succeed in specialist market sectors and become a dominant force in world shipbuilding, management systems, R&D capability, quality assurance through skilled workers and software must be developed to maximise opportunities created by expanded yards.
Purple patch for owners
Thanks to the Chinese economic growth, shipping companies in China are also experiencing a purple patch. Cosco Container Lines (COSCON) currently has a fleet of about 120 modern container vessels totalling over 300,000teu. Buoyed by the healthy market, the Shanghai-based company now plans to expand. “Over the next two years, our fleet capacity will grow to 450,000teu, which will involve European and American trunk services deployed with 5,400 and 9,500teu vessels,” says Hou Liping, deputy general manager of COSCON’s safety and technology management division. The company will take delivery of the world’s first 10,000teu vessel from Hyundai in 2007. 15 other mega ships are scheduled for delivery in the years to come.
Cosco Dalian Ocean Shipping is also enjoying good times. The tanker arm of Cosco currently owns 32 vessels and recently took delivery of six newbuildings. “China is going to be having a major requirement for the import of crude in the coming years,” says Li Jun Bao, manager of the technical department at Dalian Ocean Shipping. “So we want to get a stronger position in the Chinese market.” And while China’s crude oil imports continue to rise, the most recent newbuildings demonstrate the company’s ability to meet market demands and clients’ needs, he feels.
The China Shipping Group is one of the country’s largest maritime players with nearly 11.5m dwt of owned tonnage, comprising around 400 vessels. The fleet covers vessel types from tankers, tramps, passenger ships, container vessels and special cargo ships. Over the past few years, the company has made rapid strides in container shipping, which currently comprises over 100 vessels with a capacity of nearly 300,000teu.
“The China Shipping Group, founded in July 1997, is one of the state-owned enterprises under the direct administration of the Central Government. It is a super-large shipping conglomerate that operates across different regions, sectors and countries,” explains Chen Jian, deputy managing director of China Shipping Development, the tanker arm of the group.
Commonly known as China Shipping Tankers, the Shanghai-based company owns and operates a fleet of 88 tankers totalling 3.5m dwt. “Along with the rapid development of the national economy and the requirements of the state strategy concerning oil storage, the company is adjusting its fleet structure on a large scale to meet its objective of becoming a world-class tanker fleet by 2010,” says Chen Jian – further proof, if any were needed, is that mainland owners are anything but inactive right now on the fleet expansion front.
Hong Kong-based independent shipowners are also on the expansion trail. The Parakou Group expects to further expand its fleet over the next three years. The company has reported healthy profits again this year, thanks mainly to its long-term investment strategy and time charter contracts with ‘first class’ charterers.
Chairman and chief executive officer C.C. Liu expects a generally favourable trend to continue, despite the likelihood of a moderate correction. “The expanded fleet number will include both tankers and bulkers. Currently our fleet has an average age of about five years, and with approximately two-thirds on long-term charters our business is very safe.”
Bullish on China
Long term, Mr Liu maintains that China and India have fundamentally redrawn the shipping equation, while there still remains considerable room to expand the US economy. He dismissed fears of a ‘hard landing’ in China, insisting that its hunger for raw materials will continue, thus propping up shipping fortunes for the foreseeable future.
Sinotrans Shipping Ltd, which currently operates a fleet of about 40 ships, totalling over 2m dwt, also has plans to expand its fleet. “Like many in the maritime sector, we recognise that rapid economic growth in China will have a long-term effect on the shipping industry, particularly in terms of demand for vessels,” says Tian Zhong Shan, managing director of Sinotrans Shipping Ltd. “As long as China continues on its current path, the country will provide a solid underpinning for the market,” he believes.
With the booming economy, increased demand for raw materials and a focus on increasing its shipbuilding capacity, China is truly emerging as a key maritime nation.
|Paul Sun Bo, President of Dalian New Shipbuilding|
|Qi Ya Xian, Deputy director of SWS’ sales and marketing department|
|Hu Keyi, Technical director at Jiangnan shipyard|
|Li Jun Bao, Manager, technical department, Cosco Dalian Ocean Shipping (COSCO Group)|
|Chen Jian, Deputy managing director, China Shipping Development|
|C.C. Liu, Chairman and chief executive officer of the Parakou Group|
|Tian Zhong Shan,Managing director of Sinotrans Shipping Ltd|