20% Higher than China! Japanese Shipbuilding Enterprises Lack Competitiveness in Building Bulk Carriers

Compared with its Chinese counterparts, the Japanese shipbuilding enterprises are obviously lacking in price competitiveness in the bulk carrier market, making the construction of merchant ships a "sunset industry" in Japan.

According to a recent report released by Affinity (Shipping), a British broker, in comparison with Japanese shipbuilding enterprises, Chinese enterprises can save the costs by 15% to 20% in the market of medium bulk carriers.

Affinity indicates that Japanese shipbuilding enterprises currently offer about $32 million or 33 million for Kamsarmax bulk carriers of the Tier III specification and more than $30 million for Ultramax bulk carriers. Such a price is too high in today's market, 15% to 20% higher than the price quoted by Chinese shipping companies.

According to Affinity (Shipping), earlier in the year, the Japanese ship-building companies already sold out Tier II bulk carriers scheduled for delivery. At present, however, these companies are facing challenges in trying to sell Tier III bulk carriers. As most Japanese shipbuilding companies are fully redesigned to meet the requirements of EEDI, Tier III and HCSR, their cost growth is far faster than the rate of freight and the level that the market can bear.

Based on the data from Affinity, China is the world's NO. 1 shipbuilding country by weight ton, with orders accounting for 43% of the world's market share while the share held by Japan and Korea was 21% and 31% respectively.

However, Affinity points out that the lack of price competitiveness belies one more fundamental and more important problem in the Japanese shipbuilding sector.

Actually the construction of merchant ships in Japan has become a "sunset industry" and Japan has lost its competitive edge as a shipbuilding country

Affinity says that in addition to excessive labor costs, the long-term squeeze on Japan's competitiveness has led to a reduction in investment in equipment and research and development. Affected by this, Japanese shipbuilding companies are now lagging behind their competitors technically, even though they enjoy a high reputation in building reliable and efficient ships.

Affinity holds that Japanese shipbuilding companies can mass-produce simple traditional ships with impeccable reliability; however, they are confronted with  difficulties in producing more complex and high value-added ships such as cruise ships, OSVs and even some LNG ships.

Source: Shipping Industry