While China and South Korea compete fiercely in the high-end ship market such as LNG carriers, in the three traditional ship type markets, Japanese shipbuilders have seen bulk carrier orders surge this year. As the price gap between Chinese and Japanese shipbuilders is rapidly narrowing, Chinese shipbuilders are losing their leading advantage.
Chinese shipbuilders raise prices, China-Japan LNG Price gap for LNG-powered Capesize bulkers narrows sharply
According to Japanese media reports, taking LNG-powered Capesize bulk carriers as an example, Chinese shipbuilders currently quote about US$85-90 million per vessel, while Japanese shipbuilders quote slightly above US$90 million, narrowing the gap to about US$5 million. Until last year, Chinese shipbuilders quoted as low as about US$70 million for this ship type, while Japan quoted US$90 million, a price gap of as much as US$20 million.
Relying on price advantages, Chinese shipbuilders won almost all LNG-powered Capesize bulk carrier orders since last year. Clarkson data shows that a total of 39 LNG-powered Capesize bulk carriers have been ordered since last year, of which 36 were received by Chinese shipbuilders, including 23 by New Times Shipbuilding, 10 by Waigaoqiao Shipbuilding and 3 by Beihai Shipbuilding Heavy Industry. Most of these orders come from overseas shipowners and serve long-term charters for BHP and Anglo American.
In contrast, only 3 orders went to Japanese shipbuilders, namely the 3 210,000-dwt LNG-powered bulk carriers jointly ordered in July this year by Japan's second-largest steel group JFE Steel and Japan's three major shipping companies. These 3 new vessels will be developed and designed by Nihon Shipyard, a joint venture between Japan's two major shipbuilders Imabari Shipbuilding and Japan Marine United (JMU), and are scheduled to be built at JMU and Imabari Shipbuilding in the future.
In this regard, Japanese industry insiders commented that Chinese shipbuilders may have taken some low-priced orders last year; this year, rising steel prices plus rising labor costs have made it more difficult for Chinese shipbuilders to make a profit, and their quotations have risen accordingly. "Chinese shipbuilders are currently offering more reasonable prices."
China gradually loses low-price advantage, Japanese shipbuilders' orders surge, mostly bulk carriers
Against the backdrop of a continuously recovering global newbuilding market, Japanese shipbuilders' order intake grew significantly this year. In the first half of the fiscal year (April-September), total order intake has approached the full-year level of fiscal 2020.
According to data released by the Japan Ship Exporters' Association (JSEA), in the first nine months of this year, Japanese shipbuilders received orders for 248 vessels totaling 12,211,740 GT, a year-on-year surge of 150.8%. The ship types include 56 general cargo ships, 168 bulk carriers, 23 oil tankers and 1 ferry.
Japanese media said that bulk carrier and container ship freight rates remain firm, and these two ship types account for the largest proportion of orders received by Japanese shipbuilders, among which small and medium-sized bulk carriers have always been one of the main ship types of Japanese shipbuilders. It is understood that major Japanese shipbuilders signed a large number of construction contracts for small and medium-sized bulk carriers this year, which is the flagship product of Japan's shipbuilding industry. While Chinese and Korean shipbuilders frequently receive orders for large container ships, Japanese shipbuilders have seized the opportunity to target the small and medium-sized bulk carrier market and accumulate orders by grasping the favorable opportunity of rising ship prices. At present, many shipbuilders have sold out almost all delivery slots for 2024.
As Chinese shipbuilders have raised ship prices since the beginning of the year, some shipowners have turned to Japan to order vessels with better environmental performance. Major Japanese shipyards have successively received orders for bulk carriers including Panamax, Ultramax and Handysize. Some of these orders come from European shipowners and adopt new designs that comply with greenhouse gas (GHG) regulations and EEDI Phase 3 requirements. Japanese shipbuilding industry insiders said that some European shipowners appreciate the construction quality of Japanese shipbuilders and are willing to pay higher prices than those offered by Chinese shipyards for the same type of vessel.
As China gradually loses its low-price advantage, the Japanese side believes that ships built by Japanese shipbuilders have excellent fuel efficiency, and considering the current price difference, it is entirely reasonable for shipowners to order ships in Japan. The only factor yet to be observed is the difference in ship types.
It is understood that the main ship type of Japanese shipbuilders in the Capesize bulk carrier segment is the 210,000-dwt wide-body shallow-draft vessel, which can adapt to the shallow waters of the Seto Inland Sea where Japanese steel plants are located, as well as the tidal fluctuations of iron ore loading ports in Western Australia, maximizing loading capacity. It is the ideal choice for trade routes between Australia and Japan. The 3 LNG-powered bulk carriers ordered by JFE Steel this year adopt this wide-body shallow-draft design.
On the other hand, in addition to the 210,000-dwt class, Chinese shipbuilders can also offer the 180,000-dwt Dunkirkmax type, which has good versatility and can be used on a wide range of raw material trade routes, including Brazil-China. Therefore, the Japanese industry points out that at a time when the price gap is narrowing, shipowners' demand for different ship types may become the key to affecting the future order competitiveness of Chinese and Japanese shipbuilders.
