Shipbuilding Competition Among China, the United States and South Korea

The United States imposes tariff on Chinese-made ships entering the ports. Some people believe that it may cause Chinese shipbuilding industry to lose some orders while Korean shipbuilding industry may benefit from it. Shipbuilding industry competition among China, the United States and South Korea, China has unique competitive advantages in shipbuilding efficiency, cost, price and supply chain integration. The resilience and dominant position of Chinese shipbuilding industry is hard to be easily shaken.

Professionals point out that Korean shipyards face problems such as capacity constraints and labor shortages etc. Additionally, South Korea hopes the shipbuilding industry become the key cooperation area to relieve the bilateral trade imbalance and help the United States rebuild shipbuilding capabilities in the trade negotiations with the United States, which may bring in a shadow on the long-term prospects of Korean shipbuilders.

Some Chinese shipbuilding companies may face hard-won orders being taken away by Korean competitors. As another global shipbuilding country, the profits and sales of the shipbuilding companies have increased in South Korea. In the first quarter of this year, Hyundai Heavy Industries got strong performance. The profit increased 436% year-on-year to 859.2 billion (194 won is about 1 RMB) and quarterly sales were 6.7 trillion won with an increase of 22%.The net profit of Samsung Heavy Industries increased tenfold to 90.1 billion won and the operating profit increased to 123.1 billion won. The net income of Hanhwa Ocean in first quarter was 215.7 billion won with an increase of 323% year-on-year.

The competitive advantages of China in efficiency, cost, price and supply chain integration have not changed. Some orders may flow to South Korea, but the quantity may not be large because China has the ability to withstand the pressure. Considering the restrictions in Korea, Whether South Korea can get substantial benefits remains to be seen.

According to the research statistics from UK Shipping Data provider Clarkson, in the first quarter of this year ,the order volume of Chinese shipbuilding companies reached 9.451 million tons, accounting for more than half of the global in total. While Korean share was 35.4%.Last year, China received 70% of global orders, while Korean companies received for only 17%.

Analyst points out that South Korean shipyards face obstacles in scaling up quickly to meet new demand. Meanwhile,South Korea is dealing with labor shortage. There is some capacity constraints in China, while good production management is also a part of competitiveness. Orders will flow to those who can build ships fast.

A previous article in the South China Morning Post mentioned that the American provocation against China in the shipbuilding industry may backfire. Because China accounts for more than half of the global shipbuilding market share and it is extremely difficult to find a solution to replace China. It is not be possible for American Asian allies Japan and South Korea to fill the resulting production gap at all. Besides, there is some problem on port charging scheme when executed.