China’s Shipbuilding Empire Conquers the Globe

Recently, the Ministry of Industry and Information Technology released the latest data on China’s shipbuilding industry for the first three quarters of 2024, with new orders in China accounting for 74.7% of the global total.

After 14 years of competition between China and South Korea, a historic moment has finally arrived. China’s shipbuilding industry is now surpassing South Korea.

From the era of “Three Kingdoms” to the “Dual Dragon Summit”

The global shipbuilding industry has undergone a century of turbulence. In the 1960s, Japan challenged the century-long dominance of Europe and the United States, at one point holding half of the global market share. By the 1980s, South Korea and China began to catch up, marking the start of the “Three Kingdoms” era in global shipbuilding.

In 2000, South Korea officially surpassed Japan with a 40% market share, claiming the top spot globally. China, at that time, only held a modest 4% market share. Over the following decade, the dynamics among the three nations shifted. China surpassed South Korea for the first time, Japan declined, and the “Three Kingdoms” era transformed into the “Dual Dragon Summit.”

Changes in Global Shipbuilding Market Share

The year 2010 was a crucial turning point for China’s shipbuilding industry, signaling its entry into the ranks of top global players. However, China’s position as “global number one” was not yet secure. Over the next decade, China and South Korea engaged in numerous battles, with victories and defeats on both sides. It was not until 2021 that China truly surpassed South Korea. In the following years, China further widened the gap with South Korea.

Shipbuilding is assessed by three key indicators: completed tonnage, order backlog, and new orders, which collectively measure a country’s shipbuilding capabilities from the past, present, and future. The Ministry of Industry and Information Technology’s data for China’s shipbuilding industry in the first three quarters of 2024 show that China leads globally in all three indicators, accounting for 55.1%, 61.4%, and 74.7% of the global total in terms of tonnage, order backlog, and new orders, respectively.

New order volume is crucial for the future and is considered a key indicator of the shipbuilding industry’s direction, marking the focal point of intense competition between China and South Korea. In the first three quarters of this year, China held the top position for seven months, while South Korea led for two months. A highlight was the fierce competition in July and September. In July, South Korea secured 40% of the orders, taking the lead. However, in September, China made a strong comeback, reclaiming the top spot with an impressive 90% market share.

The competition is intense. In terms of ship types, South Korea leads in LNG transport ships, while in container transport ships, China and South Korea stand side by side. In the tanker sector, China has surpassed South Korea. Although China has surpassed South Korea in terms of volume, it has yet to establish an absolute advantage in the industry.

From chasing to leading

So why do we say that China’s shipbuilding industry has started to crush South Korea? It’s because China has found a new track – green ships.

Green ships, also known as low-carbon ships, refer to vessels that reduce pollution and greenhouse gas emissions. There are two directions for greening ships: One is optimizing ship propulsion systems, adding new technologies such as desulfurization systems, and the other is using green new fuels as ship power. Using new fuels is the most direct and effective way for the shipping industry to reduce carbon emissions and has become the mainstream for the future.

New fuels for ships include liquefied natural gas (LNG), liquefied petroleum gas (LPG), biofuels, methanol fuel, ammonia fuel, and more. Taking LNG as an example, compared to the heavy oil fuel traditionally used by large vessels, it can reduce nitrogen oxide emissions by 85%, carbon dioxide emissions by 20%, and sulfur and particulate emissions by 100%. In the field of green ships, China is outperforming South Korea.

Firstly, in terms of market share. Clarkson’s data shows that China has taken on over 70% of global green ship orders. In contrast, South Korea has only secured 22% of orders. Secondly, in full coverage. Various types of ships such as LNG dual-fuel, methanol dual-fuel, ammonia dual-fuel ships, battery hybrid power, and more have achieved full coverage of mainstream ship types and new fuels. In contrast, South Korea’s orders are all for LNG dual-fuel ships.Thirdly, in technical strength. China has achieved several global firsts or largest in green ship manufacturing, such as:

The world’s first VLCC (Very Large Crude Carrier) powered by LNG
The world’s first ammonia-powered ship
The world’s largest and most environmentally friendly dual-fuel car carrier
The world’s largest 700 TEU (Twenty-foot Equivalent Unit) pure electric container ship launched

The world’s largest and most environmentally friendly dual-fuel-powered car transport ship.

In comparison, in the green ship race, China has a larger market share, more types, and stronger technology than South Korea, showing a trend of dominance. If in LNG carriers and container ships, China is catching up, then in the field of green ships, China is leading.

Moreover, the advantage in green low-carbon technology will help China achieve “overtaking on a curve” in other types of vessels. Maritime transport accounts for 90% of global trade transportation, and the environmental pollution issues it brings have received high attention from the international community.

In July last year, the International Maritime Organization adopted a new strategy for reducing greenhouse gas emissions from ships, proposing a vision to achieve net-zero greenhouse gas emissions from international shipping around 2050. In recent years, the proportion of green ships in new ship orders has been steadily increasing, from 8.2% in 2016 to 41% this year. Experts predict that by 2035, ships will achieve 100% greenization. The power revolution triggered by green and low-carbon technology will reshape the global shipbuilding industry landscape.

China has taken the lead in green ship technology and will inevitably spread throughout the entire shipbuilding industry, ultimately overshadowing South Korea.

Riding the tide to move forward

In May of this year, a South Korean industrial research institution released a report stating, ‘China’s comprehensive competitiveness in the shipbuilding industry surpassed South Korea for the first time last year.’ Where does the comprehensive competitiveness of our shipbuilding industry come from?

Recently, I saw a piece of news that the first domestically-built large cruise ship, the ‘Aida Modu,’ has completed 64 voyages and carried over 250,000 passengers since its maiden voyage on New Year’s Day this year.

Domestic Large Cruise Ship “Aida Mordor”

The localization of cruise ships is a microcosm of technological breakthroughs in China’s shipbuilding industry and one of the core competitive advantages of our shipbuilding industry. In addition to technology, let’s consider a few more dimensions of observation.

Firstly, economies of scale advantage. China has the world’s largest shipbuilding capacity, and this scale advantage brings cost advantages. Data shows that Chinese shipbuilding prices are about 10% to 15% cheaper than South Korean shipbuilding prices. In September of this year, China Shipbuilding Industry Corporation and China State Shipbuilding Corporation announced their merger, further amplifying the economies of scale advantage. Jingjiang City in Taizhou, Jiangsu Province, is the largest private shipbuilding base in the country, accounting for 10% of the global shipbuilding completion volume. Looking at the county level to represent the whole country, the vast scale of China’s shipbuilding industry is evident.

Secondly, abundant labor force. Shipbuilding is a complex and comprehensive industry, requiring a high level of capital, technology, and labor intensity. South Korea faces a relative shortage of labor. In order to alleviate the labor pressure on shipbuilding companies, the South Korean Ministry of Trade, Industry, and Energy, in conjunction with the Ministry of Justice, opened a ‘green channel’ in 2023, allowing South Korean shipbuilding companies to increase the proportion of foreign labor from 20% to 30%. In addition, frequent strikes and labor disputes have also affected the production efficiency of South Korean shipbuilding companies and increased operating costs. Comparatively, Chinese shipbuilding companies face much less pressure in terms of labor.

Thirdly, strong demand. According to Clarkson data, in August 2023, China surpassed Greece to become the world’s largest ship-owning country in terms of total tonnage, with a fleet size of 249.2 million total tons and a fleet value of $180 billion. The large number of ships in China’s fleet helps to absorb domestic shipbuilding capacity.South Korea’s fleet size is only 60 million total tons, which has a smaller impact on domestic shipbuilding demand.

From a higher perspective, China is the world’s largest manufacturing country, driving significant export demand, leading to China becoming the world’s largest trading country, which in turn fuels substantial maritime demand, contributing to China becoming the world’s largest ship-owning country and leading to significant shipbuilding demand, ultimately establishing China as the world’s largest shipbuilding country.

It can be seen that the industrial chain of China’s manufacturing-foreign trade-shipping-shipbuilding has already taken shape. Leveraging scale to drive scale, achieving the greatest with the largest.

China’s shipbuilding industry is riding the tide to move forward, starting to outperform South Korea.”