China’s vast shipbuilding capacity is here to stay

Top shipyards to hold their position in a market downturn, with offshore converts and coastal players likely to bear the brunt. China’s shipbuilding industry is expanding at its fastest pace in years, reviving memories of the capacity boom that preceded the sector’s painful downturn after 2008.

Maritime Strategies International (MSI) director Stuart Nicoll said order surges in both periods were driven largely by strong freight markets and exceptionally high profitability for shipowners. In the run-up to 2008, rapid industrialisation and construction activity in China fuelled strong growth in seaborne trade, creating a shortage of shipping capacity and sending earnings soaring. Global cargo growth averaged 4.2% a year between 2000 and 2008, with particularly strong growth in dry bulk commodities and containerised trade. The backdrop to the current boom is different, Nicoll said. “Shipping markets have also enjoyed periods of exceptionally high earnings over the past five years, but trade growth has been much weaker,” he added. Read more at TradeWinds