Report: China's shipbuilding to triple

Report: China's shipbuilding to triple

China's shipbuilding capacity is set to increase threefold to 3.5 million compensated gross tons in the coming years, according to a new report by Drewry Shipping Consultants.

If China continues to develop at the current rate, it will strengthen its position as a leading force in world shipping, taking a possible 16 percent share of the market by 2005 or 2006, the report says.

Commenting on the rate of growth and development in China, John Harris, a director at Drewry, said, "The impact on the world market of this rapid growth is likely to increase the level of competition dramatically and pressure on margins will be significant."

The report notes that present shipbuilding capacity in China is substantially higher than the trend indicated in the last assessments by the Organisation for Economic Cooperation and Development in 1998 and 2000.

China currently ranks third in the world as a shipbuilding producer, with about 7 percent of the market, measured in compensated gross tons.

Compensated gross tons, or CGT, refers to the volume of the enclosed spaces used to carry cargo.

Drewry shipyards analyst Sue Hall, who authored the report, said that the future expansion rate is also likely to exceed earlier OECD assessments. The OECD estimated that capacity in 2000 was 1.4 million CGT, but Drewry's assessment of capacity at the end of 2002 for the top 20 yards alone is 2.4 million CGT, she said.

Actual output from those same top 20 yards between 1999 and 2001 averaged just less than 1.2 million CGT per year, representing about 55 percent utilization. Taking into account other facilities, Drewry's assessment of current capacity is closer to 3.2 million CGT.

Compared to South Korea, China is winning an increasing number of shipbuilding orders and there is little doubt that the output will continue to grow, said Hall.

The report also found that ship repair is another significant and growing sector and one where Chinese yards are becoming increasingly recognized, not just for their ability to quote low prices for steelwork repairs, but also their increasing competence in the full range of ship repair activities.