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China's shipping
prowess
By Michael Mackey
SHANGHAI - China looks set to follow the
route two other Asian countries did to herald
their arrival as industrial powers - become a
shipbuilding power.
Leading the charge has
been China State Shipbuilding Corporation (CSSC),
one of the country's two major shipbuilding
companies. "We plan to boost our output to 4.36
million dwt [deadweight tons] in 2005 to ensure we
meet our goal to be in the world's top five," said
Chen Xiaojin, CSSC's general manager. Last year,
the yards run by CSSC turned out 3.57 million dwt,
up 64.5% over the previous year's total - most of
which were for exports. Looking forward, by 2010
the group aims to be in the global top three and
hopes to be No 1 by 2015 - propelling China's
shipbuilding industry and China itself to becoming
the world's largest shipbuilder. Chinese yards
already are at a degree of technical proficiency
that orients them for being quality, not just
volume, suppliers.
Shanghai Waigaoqiao
Shipbuilding Co Ltd, one of the jewels in CSSC's
crown, has just signed a deal with ConocoPhilips
China Inc to build a 300,000 dwt floating
production, storage and offloading (FPSO) vessel.
The contract is worth US$230 million - the most
expensive ship and also the largest FPSO China has
ever built. FPSOs, besides being able to load and
process raw crude and store and offload stabilized
crude, can also serve as production units for
offshore oil and gas exploration projects. This
one, due to be delivered in early 2007, will have
a storage capacity of 2 million barrels.
Hebei Ocean Shipping Company (HOSCO)
unveiled at the end of last year the Hebei
Innovator. Previously a 250,000 dwt very large
crude carrier (VLCC), its owner, HOSCO, China's
emerging shipping star, saw there was more
potential for the Hebei Innovator as a very large
ore carrier (VLOC) and converted it. As the HOSCO
statement less than modestly said, it was playing
"a leading role in technical reconstruction and
innovation". This is of course a major challenge
to the established shipyards in Korea and Japan
but is not without challenges for the Chinese
yards themselves.
China has several big
advantages, according to Even Winje, managing
director of ship broking firm Winmar. For
starters, he said, China's coastline totals 14,500
kilometers compared with South Korea's 2,413.
"Korea is Indiana, Japan California and China the
US. This tells you something about the scale,"
said Winje at the recent Shipping China 2005
conference.
His second point is more
telling. The Korean and Japanese economies have
moved far beyond the phase of industrial
development associated with shipbuilding. There
might be some amount of romanticism associated
with sea trades but they, unlike computer software
and services, are neither clean nor safe. And
mature economies avoid any economic activity that
entails the three Ds - dirty, dangerous and
difficult. So the field is wide open for China.
Some two-thirds of the Chinese population
is raring to head for the urban centers and join
the wage economy - providing an incredible flow of
cheap, three-D labor. Wage costs in China are a
quarter of those in Korea. Again, some two-thirds
of the working population in Korea and Japan are
already employed in the services sector, which is
unlikely to be reversed ever again. The advantage
is China's yet again.
True, there will be
some costs in training new workers and
professionals to the standards already attained
elsewhere, but they are likely to be low and borne
by the government at this point. As some industry
sources admit, there's a need to upgrade the
Chinese yards' way of thinking, through research
and development centers and bringing in more
foreign experts.
The development of the
Korean and Japanese economies also points to
another advantage - the cost of suitable land. In
China this is currently about $5-6 per square
meter. "Possibly even lower in some regions if you
have the local government supporting you," said
Winje. This is much less than South Korea, where a
comparative figure would be $30-50. These
advantages, and the momentum created by the growth
of the Chinese industry explain the spurt in
shipbuilding. Winje said 15 new yards and
expansions were underway at the moment. "We cannot
really see a better place to build a shipyard,"
said Winje, a Norwegian.
There are a few
caveats though. As so many of the inputs that go
into shipbuilding need to be imported (notably
steel), the industry is already a victim of its
own success. "Currently, supply chain is the
biggest bottleneck for Chinese shipbuilding," said
Simon Liang, chief executive officer and president
of SinoPacific Heavy Industries. There are two
consequences discernible in all this - one clear
and the other more complex.
One, China's
emergence as a shipbuilder, paralleling its rise
as a car maker, will establish it as an industrial
power as opposed to a place of cheap volume
assembly. Simply put, it will have passed a
Rubicon that is very hard to reverse, though
development does not stop at that point. Two, the
losers could be countries such as Korea and Japan,
who are still volume shipmakers and might not be
able to cope with such a powerhouse on their
doorstep.
(Copyright 2005 Asia Times
Online Ltd. All rights reserved. Please contact us
for information on sales, syndication and republishing.) |
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