The latest global building portfolio shows a 5% decline from 2008 levels, but the total number of contracts signed was still 205% higher. To stay competitive, shipyards must begin to look at new patterns and orders. Here are a few of the biggest challenges in the industry:

The development of global shipbuilding has been dynamic over the last few years. In 2009, new shipbuilding projects were valued at 44.4 million CGT, up from 40 million CGT in 2008. For the full year of 2010, deliveries should reach 52 million CGT. This trend is likely to continue, although some new entrants are catching up fast. While the overall number of new building projects has declined, the order book remains relatively high.

Historically, Europeans dominated the world market until the twentieth century. The fast growth of the Japanese economy helped them achieve leadership. For a period of time, they controlled 90% of the market. But in recent years, China has gradually overtaken Europe and Japan. In addition, South Korea declared shipbuilding a strategic industry in the 1970s. It combined low labor costs with shipbuilding to rise to leadership. However, in 2006, China caught up and now surpasses both Japan and S. Korea in the industry.

The growth of the shipbuilding industry is dependent on global markets and macro factors. Those raw materials are needed to build industries, and houses, and move populations. Eventually, they can be refined and resold to make more money. Added value drives prosperity and makes it possible for developing countries to scale up and diversify their economies.

In addition to increasing competition in global shipbuilding, the shrinking world order book is a major concern. Several countries such as Japan and India are losing new orders to new players, and the European industry is putting its global competitive position under immense pressure. At the same time, the economic climate in Europe is not conducive to growth. This is the primary reason for this globalization. While many aspects of globalization are beneficial, it is important to remember that the shipbuilding industry is highly dependent on international trade.

Over-capacity in the world shipbuilding industry has a number of serious consequences for the industry. It has had a painful impact on shipbuilding countries and has led to an oversupply of the global fleet. The historical development of the shipbuilding industry shows that not all lessons were learned. In order to avoid over-capacity, shipbuilding countries should begin to think about new orders and investigate new patterns of competition.

Shipbuilding companies’ profits are negatively affected by the over-capacity. In recent years, the shipping industry has experienced a downward spiral of earnings and over-capacity. From early 2012, their total shareholder return (TSR) has lagged behind the MSCI World Industrials Index, a composite measure of stock returns. The industry has underperformed both indexes, with carriers performing the worst among all segments.

Moreover, shipbuilding companies should also diversify their business models. Among them, Chinese and Korean shipyards should shift to building other types of ships, as they currently have overcapacity in the traditional bulker market. The competition between them should be more intense. If that does not happen, then the industry will not be able to keep up with the growing demand for these types of vessels.

A forecasting model is necessary for assessing capacity expansion. The resulting results are shown in Fig. 14. While the expansion of construction capacity was efficient in the seven years from 2004 to 2011, it is ineffective in the long run. This trend in shipbuilding capacity expansion is accompanied by rapid growth in demand in the first few years after the 2008 recession. If capacity expansion were more controlled, the current recession would not be happening today.

The United States and other countries initiated negotiations on a deal that aims to create a new discipline in government support for shipbuilding. The European Commission proposed that the agreement cover issues of unfair pricing and dumping practices. These issues are of major concern to shipbuilders because of the potential for distortion of competition. The US government sought to make the agreement legally binding, so it included provisions for dispute settlement and sanctions to protect individual shipbuilders.

Governments of other countries and the European Union also supported shipbuilding subsidy programs. The South Korean government has been a strong supporter of the industry, providing tax holidays and capital incentives. The Japanese government is another supporter of the industry, providing large subsidies and easy finance for shipbuilding projects. The latter is a particularly attractive option for shipbuilders since it allows for loan deferments and simplified licensing procedures.

Various studies show that subsidies in the worldwide shipbuilding industry can have an impact on competition. China’s growing dominance in the maritime supply chain is the result of a complex system of formal and informal state support. Between 2010 and 2018, Chinese state aid to the shipping industry totaled $132 billion. CSIS excluded state-backed fundraising, direct subsidies to unlisted firms, and non-market advantages from the state-capitalist system in China.

The benefits of subsidies to the worldwide shipbuilding industry are difficult to assess. The Chinese shipbuilders increased their market share by more than two-fold over the previous five years, while the Japanese and South Korean shipyards lost their share of the global market. While China’s shipyards have benefited from government subsidies, their overall efficiency is inferior to those of Japanese and South Korean shipyards. There is a need to examine the broader implications of subsidy in shipbuilding.

While China’s industrial policy toward shipbuilding has been in place for a decade and a half, the Chinese government has given out multiple subsidies, including those for land and capital costs. These subsidies total about 85 billion dollars. Since the start of this policy, China has gone from being a marginal player to the world’s leading exporter of commercial ships. The World Trade Organisation has taken a similar approach.

Governments and banks have encouraged shipping and the shipping industry throughout history. In the early days, the logic was military – a strong merchant fleet meant a lot of boats to commandeer in times of war. Increasingly, governments also encouraged shipping by awarding lucrative postal contracts. The Cunard line, for example, benefited from these postal contracts. In the early 1900s, Japan and America took advantage of easy finance in the form of cut-price government loans.

China is also becoming the dominant player in the maritime supply chain, assisted by a complex system of formal and informal. This number includes financing from state banks, direct subsidies to unlisted firms, state-backed fundraising, and non-market benefits from the state-capitalist system. Trade distortions in the worldwide shipbuilding industry should be addressed to ensure fair competition and competitiveness.

China’s industrial policy may also be at fault. The sudden drop in production costs made Chinese shipyards produce as if their prices had sunk. That was not the case in the past, however. In China, the government’s shipbuilding policy, however, led to an unsustainable situation, affecting the industry and the lives of thousands of workers. The government could have targeted subsidies to more efficient firms.

The shipbuilding industry is struggling to grow, as new players from Asia are now eclipsing traditional European players. While the European shipbuilding industry is improving, the overall number of contracts is significantly smaller than that of 2008. This makes it essential for shipyards to look at new patterns for future competition, and start thinking about new orders. Here are some possible solutions. Read on to learn about the most recent developments in shipbuilding.

The EU should continue to develop its trade policy toward shipbuilding in accordance with industrial policy principles and WTO procedures. EU trade policy towards shipbuilding should be designed to encourage consolidation among European producers to free up resources for new investments. EU-Korea FTA negotiations should examine the current closure aid rules and apply proactive measures to ensure that European firms can survive in the market.

Shipbuilding countries have a global overcapacity problem. Many of them are unable to cope with the demands of the shipping industry. Overcapacity in a country can cause a painful impact on the industry. As a result, there is a shortage of shipping contracts. The overcapacity problem has been an ongoing challenge since the beginning of the industry. However, there is hope. The Working Group on Maritime Industries Forum is looking into the issue. The Shipbuilding Dialogue with China is also examining the issue of IPR in shipbuilding.

In recent years, the development of the global shipbuilding industry has been very dynamic. In 2009, completions in the sector amounted to 44.4 million CGT. The full year of 2010 should see around 53 million CGT in deliveries. There have also been problems with steel prices.