JAPANESE shipbuilders are worried over potential price wars and government support amid consolidation efforts in China and South Korea, yet their competitiveness could be enhanced by tightening environmental regulations, according to a top official.
Newbuilding demand and prices have shown signs of bottoming since the beginning of this year, having spent much of 2015 and 2016 in the doldrums.
Clarksons data suggested total contracting amounted to 10.8m dwt in January-April 2017, still weak but up 8% on year, mainly boosted by strong ordering of tankers.
Shigeru Murayama, president of Japan Ship Exporters’ Association, said he was concerned that Chinese and South Korean shipbuilders could use low contract prices to lure shipowners into filling their slots.
“We fear Chinese and Korean yards suffering a drop in order backlog level may attract orders at prices far below the construction cost,” said Mr Murayama, who also chairs the Shipbuilders’ Association of Japan and Kawasaki Heavy Industries.
“Since ships of every type are priced at attractive levels for shipowners, we cannot exclude the possibility of speculative order placements in anticipation of a market recovery,” he told Lloyd’s List in an exclusive interview during the Nor-Shipping week.
China and South Korea have experienced large consolidation efforts among their shipyards over the past years, with second- and third-tier yards squeezed out but large, state-linked conglomerates remaining.
Commenting on the development, Mr Murayama emphasised the importance of market rules in consolidation but stopped short of making any direct criticism of individual yards.
“If this development means good use of the strength of each individual company, there is no problem,” Mr Murayama said. “But if the government or any public body is really supporting survival of companies that deserve weeding out, we very much regret [that].”
In Japan, even as there are cases of consolidation such as Japan Marine United and Namura Shipbuilding, many family-run small players remain. The ones that are reducing the scale of shipbuilding business are industrial giants KHI and Mitsubishi Heavy Industries.
“Every shipyard is groping for a way to survival… whether business consolidation is advisable or not is something to be left to the discretion of the companies concerned, and I think we have to pay respect to the judgement of each,” Mr Murayama said.
Japanese yards received newbuilding orders totalling 900,000 dwt in January-April, versus 3.8m dwt contracting in China and 4.6m dwt in South Korea, according to Clarksons.
However, with stricter International Maritime Organization environmental regulations taking effect, such as the ballast water convention this year and the new global sulphur cap in 2020, Mr Murayama said Japanese yards would seek to stay competitive with their capability in ecoships.
Having expected the regulations to trigger further newbuilding demand recovery from 2018, Mr Murayama said Japanese yards should specialise in environmental friendly ships “which are cost-competitive and embody Japan’s excellent… technology”.
“The fundamental posture of the Japanese shipbuilding industry is to differentiate itself from competitors with technical excellence by appropriately meeting environmental controls and improving fuel efficiency and to attract orders at decent prices.”
What Japanese shipyards wanted from the government was to help establish a level playing field in international markets, Mr Murayama said. Japanese and German industry officials have called for new global shipbuilding rules at the Organisation for Economic Co-operation and Development level, after South Korea’s Daewoo Shipbuilding & Marine Engineering received yet another bailout package mostly sponsored by state-owned entities.
While refraining from directly commenting on DSME, Mr Murayama said continued market distortion should not be allowed, “as the rules of World Trade Organisation set forth”. He added: “I hope that Japanese delegates discuss such problems with their foreign counterparts in the OECD working group for shipbuilding and establish a healthy shipbuilding market where fair competitive conditions are not distorted.”
As for IMO environmental regulations and technical standards, Mr Murayama suggested he preferred a multilateral approach in terms of participation in discussions.
While Tokyo should continue to lead the discussions over IMO rules based on the Japanese shipbuilding industry’s status, the Active Shipbuilding Experts’ Federation should also have a voice, according to Mr Murayama.
ASEF, of which Mr Murayama is a former chairman, is a non-governmental organisation whose members are national shipbuilders’ associations of China, Japan, South Korea, India, Indonesia, Malaysia, Sri Lanka, Thailand, Turkey and Vietnam.
The NGO has applied for consultative status in the IMO this March and aims to provide a technical advisory role from shipbuilders’ views from next year. The Community of European Shipyards Associations has enjoyed such a status.
“The routine observation of the shipbuilding industry can perhaps be characterised as bitter experience of repeated severe international competition,” Mr Murayama said.
“[But] it is very important for the shipbuilding industries to co-operate to share the awareness of various problems and to properly address the issue of more complex maritime regulatory issues on the basis of their extensive experience and to propose practical solutions.”
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Source: Morace
