Shipbuilders upgrade to stay afloat

Although the shipbuilding industry has undergone a slowdown over the past few years due to global maritime transport contraction at a time of economic downturn, Chinese shipbuilders have continued to enjoy growth as a result of upgrading.

Shanghai-based Hudong-Zhonghua Shipbuilding (Group) Co Ltd is one of the best examples and the liquefied natural gas carrier which it delivered in mid-July is strong evidence of this. The 174,000-cubic-meter ship, priced at $190 million, is able to hold enough LNG to supply all the demand of Shanghai for three weeks.

As explained by Chen Jianliang, chairman of Hudong-Zhonghua, LNG carriers are among the most dangerous ships in the world because they might explode due to a technical fault. However, they are also the safest because the ship will stop functioning immediately once there is one single incorrect operation.

Developing LNG carriers is of great importance to China, by helping the nation import the increasingly widely used energy from other parts of the world such as Malaysia.

According to global independent maritime research consultancy Drewry, China will import between 60 million metric tons and 100 million tons of LNG annually by 2022, which means that the market will need around 60 to 100 LNG carriers by that time. It is estimated that there will be around 500 LNG carriers worldwide by the end of this year and the number will jump to 600 by 2022.

"China's shipbuilding industry used to take the lead worldwide in terms of dead weight tonnage. However, most of the ships were low value-added ones such as oil tankers or bulk-cargo ships. By diverting to LNG carriers, we can show the techniques and skills that Chinese shipbuilders now grasp," said Chen.

"It is only by transforming to high-end shipbuilding that we can seek development. We are now representing the high-end shipbuilding capability of China, taking part in global competition," he added.

According to Chen, Hudong-Zhonghua has long experience of working with overseas partners such as Mitsui Engineering & Shipbuilding from Japan. While Chinese shipbuilders took the role of the student and overseas companies of the teacher in the past, Chen said that there is hardly any difference between Chinese companies and overseas ones in terms of shipbuilding capabilities.

"China now takes the lead worldwide in terms of hardware facilities. And we still enjoy an abundant supply of human resources. But we still need to learn from Japan and South Korea for their advanced management methods. It is only with an open attitude that we can see a win-win situation."

The attitude embracing overseas cooperation can also be found at Nantong COSCO KHI Ship Engineering Co Ltd, which is also known as NACKS. The joint venture set up between COSCO and Kawasaki Heavy Industries from Japan in 1995 has a 50-50 stake ownership structure.

According to NACKS General Manager Chen Gong, the ownership structure can give full play to the advantages of both companies. It is also one of the reasons helping NACKS seek profits over the past 17 years when the entire industry remained gloomy.

Over time, Kawasaki has reduced its shipbuilding capacity while attaching more importance to its joint venture in China. According to Chen, it is one reflection of the decline of Japan's shipbuilding industry.

"The shipbuilding industry has few barriers in terms of international trade. Competition is always there whether the company has an open attitude or not. We have always been working with international clients and partners. Only in this way can we learn from industry leaders and connect all the parts of the industrial chain," he said.