Shipbuilding is the process of designing and constructing a ship or other marine vessels. Ships are built in specialized building facilities known as the shipyard. Thus it is the shipbuilder’s equivalent to a car assembly plant. The personnel that work in this facility are called Shipbuilders.
Shipbuilding industry is one of the most profitable industries around the world. As ships are the key mode of transportation for goods around the world, the shipbuilding sector forms an integral part in the development of nations. With the advent of globalization, the shipbuilding industry has become a global phenomenon due to its increasing drive to satisfy the demand for raw materials and manufactured items around the world.
Historically, the shipbuilding industry has always been dominated by maritime nations like Britain, Spain, France, Germany, USA, Japan, Korea, and China. At the turn of the century, the bulk of the market was dominated by European shipbuilders. Their market share began to decline in the 1960s when they started losing out to Japanese builders. The ironic part is that Japan also lost out to the Chinese and the South Korean shipyards in recent times.
The sector has two major segments: namely commercial and naval segments. Presently commercial shipbuilding sectors are dominated by China, Japan, Korea, European Countries; whereas naval shipbuilding sector is dominated by USA, China, EC, Russia, Japan, India.
presently, China is the world’s largest shipbuilding nation. It has been able to position itself thus by coming onboard as a low-cost but high-volume player. This has assisted it in overtaking South Korea during the 2008–2010 global financial crisis, when it sealed the contracts to build medium and small-sized container ships. Globally, the three big players in shipbuilding based on volume of capacity are China, Japan and South Korea. In between them, they command about 89% of the global market share.
Conversely, South Korea’s “top three” shipbuilders, Hyundai Heavy Industries, Samsung Heavy Industries, and Daewoo Shipbuilding & Marine Engineering, are the dominant players in the global share for construction of large container vessels.
As freight rates continue to decline into 2016, production delays and overcapacity in the industry have led South Korean shipbuilders into financial distress. Consequently, significant market share has been ceded to their Chinese and Japanese rivals.
Shipbuilding is therefore an attractive industry for developing nations. Japan used shipbuilding in the 1950s and 1960s to rebuild its industrial structure; South Korea started to make shipbuilding a strategic industry in the 1970s, and China is now in the process of repeating these models with large state-supported investments in this industry.
The shipbuilding industry has witnessed periods of peaks and lows. One of the major low period for the industry was the global economic crisis of 2008. During this period, the demand for vessels decreased substantially, thus dragging down prices and shortening orders for the following seven years. On most occasions, it experienced periods of booms based on the fact that major share of global trade is transacted through the sea.
Recently, there has been remarkable increase in the demand for cargo and passenger ships. This is being driven by demand for bigger, greener and more economical vessels based on the rise in the level of economic sustainability and innovation. The downside to this is that the industry might enter the season of over-capacities, depressed prices, low profit margins, trade distortions and widespread subsidization. The key factors that drive the health of the industry are GDP, global seaborne trade, improved economic growth, rising urbanization, fossil fuel price and increase in global steel production.
|Global Shipbuilding Industry|
|Rank||Country||Completed Gross tonnage in 2015 (‘000)||Market Share by New Orders in 2015|