The outbreak of COVID-19 has affected the shipbuilding sector in several countries. The negative impacts of the pandemic were seen in the global ship supply chains. Considering the longer timelines involved in the development of sips, the delays are expected to result in extra expenditures for the shipbuilders. For instance, in Canada, the construction of new naval ships by Irving and Seaspan ULC in Vancouver has been delayed due to supply chain disruptions due to lockdowns and the COVID-19 measures at their shipyards. Hence, the reduction in production rates due to the pandemic-induced disruptions is expected to hinder the growth of the market during the initial few years of the forecast period.

However global shipbuilding market is expected to grow in the future due to increasing seaborne trade and economic growth, rising energy consumption, the demand for eco-friendly ships and shipping services, and the advent of robotics in shipbuilding.

South Korea, China, and Japan are the three major shipbuilding countries within the ship-building industry. The global market share of the Korean shipbuilding industry has crossed more than 40%. The global market share of China's shipbuilding industry is around 25%; the global market share of the Japanese shipbuilding industry grew to more than 15%.

In Korea, the government is taking various initiatives to support the shipbuilding industry, as the country’s companies have the largest share of new orders. The global share of China's shipbuilding is growing steadily. In Japan, several reforms have taken place.

Key Market Trends

Increasing Trade Activities Between Countries is a Growth Driver

Marine transport is the backbone of globalized trade and the manufacturing supply chain, as more than four—fifths of the world merchandise trade by volume is carried out through the marine route. The trade volume has increased with a growth rate of almost 10% during the last decade. The relatively larger increase in the volumes of imports can be explained by the increase in consumer demand in developing countries.

There is an increase in demand for maritime transport over the years and has caused a subsequent rise in the number of imports and exports across the world. With globalization taking root in the heart of many economies, there are growing possibilities of internationally trading goods providing a superior range of available products at different price points. For instance,

- The EU accounts for around 15% of the world’s trade in goods, and import tonnage had steadily increased by 5% until 2020. Today, the European Union is importing from an average of 211 unique Non-EU Trade partners each year, which represents a 22% increase in the value of goods, estimating USD 227 billion in goods. Shipping remains the most cost-effective means of transporting goods from supplier to buyer, with 75% of goods coming into Europe by sea from external partners.

The demand for the trade lane has been improving steadily since the peak of COVID-19 in April and May. For instance,

- In July 2020, the marine trade saw global ship port infrastructure capacity to reach its peak for the first time since 2019. According to the Container Trades Statistics (CTS), Asia–Europe container volume capacity in July recorded its first month of year-over-year growth since October 2019, rising almost 2% and recorded a volume of 1.52 million TEU.

- In September 2020, as per Shanghai Containerized Freight Index (SCFI), the trans-Pacific also saw an import surge from July and August, which has continued into September. The United States West Coast saw a 3.3 % increase in spot rate to USD 3,758 per FEU and is up 140% from USD 1,566 per FEU in September 2019. The East Coast spot rate jumped by 7.9 % to USD 4,538 per FEU and is up by 72.5 % from 2019.

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Asia-Pacific is Expected to Dominate the Market

China is the largest shipbuilder in the world. According to the Ministry of Industry and Information Technology (MIIT) of China, the country had a share of 43.1%, 48.8%, and 44.7% of the global market, in terms of delivery orders and order book.

The local shipyard is not only catering to the local new ship demand but also it is winning an order from other major players. For instance,

- In November 2020, Proman Stena Bulk, a joint venture with Proman Shipping and Stena Bulk, has agreed to build a methanol-powered Stena Prosperous. In the past, the joint venture signed a deal with Guangzhou Shipyard International (GSI) in China to build two IMOIIMeMAX methanol-ready 49,900 DWT vessels. These new vessels will be powered by MAN dual-fuel engines that feature water and fuel emulsion technology, which reduces NOx emissions without the need for catalytic conversion technology.

- Similarly, in September 2020, the world’s first 23,000 20-foot equivalent units (TEU) container ship construction was completed by Hudong-Zhonghua Shipbuilding Co, a subsidiary of CSSC. This was a part of contract signed by CMA CGM, a French container transportation and shipping company and CSSC. Under the contract, additional eight 23,000 TEU container ships will be co-built by Hudong-Zhonghua Shipbuilding in collaboration with Jiangnan Shipyard Co. (CSSC subsidiary).

Whereas other countries in the region are also growing rapidly from past few years. For instance, Japan is building two Future Multi-Mission Frigates (FFM or 30FFM) at two shipyards in the country. It is a next-generation multi-mission frigate designed for the Japan Maritime Self-Defense Force (JMSDF). A total of 22 Frigates are expected to be procured for the force. The Kumano 30FFM Frigate is expected to be commissioned into the Japan Maritime Self-Defense Force in 2022 following qualification trials. The Japanese government previously ordered six frigates but has an eventual requirement for 22 frigates, which will be built by both Mitsubishi Heavy Industries (MHI) and Mitsui.

Competitive Landscape

The Ship Building market is fragmented, with several players accounting for significant amounts of shares in the market. Some of the prominent companies in the Ship Building market are Mitsubishi Heavy Industries, Hyundai Heavy Industries, China State Ship Building Corporation, DSME, and others. Companies are investing heavily in research and development for the innovation of new and advanced products.

- For instance, In March 2020, Chinese conglomerate Yangzijiang Shipbuilding has secured a USD 1.15 billion order for up to ten dual-fuel containerships with a capacity of 14,000 TEU each. Titan Acquisition Holdings has agreed to acquire Huntington Ingalls’ San Diego Shipyard.

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