The Japanese government may consider allowing the merger of 15 shipbuilding yards to form a single national champion firm, Splash247 reports. That would in part be a response to industry disruptions caused by the coronavirus outbreak as well as a longer-term consolidation of the industry. The move would follow the creation of an alliance between Imabari Shipbuilding Co. Ltd. and JFE Holdings Inc.'s Japan Marine United in December 2019.
Consolidation has been led by the government of South Korea, where Daewoo Shipbuilding and Marine and Hyundai Heavy Industries Holdings Co. Ltd. are in the process of merging. The EU has held up that merger, as outlined in Panjiva's research of Jan. 2, due to antitrust concerns.
Panjiva's analysis of official government data shows a modest pickup in activity at shipyards in Japan and South Korea at the start of 2020, while China has been left behind.
Exports of completed vessels from Japan rose by 8.9% year over year in the first two months of 2020 compared to a year earlier. That followed a 4.3% improvement in the fourth quarter. Exports from South Korea, meanwhile, are 37.3% higher in the first two months of the year after a 43.4% reversal in the fourth quarter.
Exports from China, by contrast, fell by 20.1%, likely reflecting the disruption to shipyard activities relating to coronavirus. There had previously been a 48.8% surge in the fourth quarter though, potentially reflecting shipments completed ahead of the earlier-than-usual Lunar New Year.
The state of the industry will depend, of course, on the actions of the shipping operators and their willingness to place new orders as well as take current deliveries.
On the container-line side, the lack of certainty in the coming 12 months — in part shown by the withdrawal of earnings guidance by major liners including Maersk — is one sign. In the tanker sector, the collapse of the oil price due to the Saudi Arabia-Russia price war and coronavirus-linked drop in demand casts doubts there too.
The state-owned shipping companies, meanwhile, may be prevailed upon by their governments to ensure business as usual with the shipyards to preserve employment. Panjiva's analysis of CANSI data shows that while Chinese shipyards' deliveries to customers dropped by 26.7% year over year in the first two months of the year there was a 41.4% jump in new orders, largely due to a lower-than-normal baseline and orders received before the coronavirus outbreak took hold.
The remaining order book of business of 80.3 million dry-weight tons was similar to the 80.1 million dry-weight tons seen during the 2019 fourth quarter. That includes a small increase in the export orders while domestic orders are at their lowest since November 2017. In production terms, the total order book is only equivalent to 17 months of output though compared to 26 months in 2019.
Christopher Rogers is a senior researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.