Ship Building Industry Significance & Global Players
The shipbuilding industry is a core industry and plays a paramount role in world trade. More than 90% of the world’s goods are transported through maritime routes only. This makes the countries building these ships pivotal to global trade and reliable supply chains. Around 95% of the world’s ships are being built by only 3 countries: China, Japan, and South Korea. This article provides insights into why these countries have become dominant players and their corresponding implications on the global market.
Current State of Global Shipbuilding Industry
China, South Korea, and Japan have dominated the world’s ship building industry in the last decade. This information is according to the United Nations trade and development website (unctadstat). As per the latest data (as of June 5, 2024) available from UNCTAD website below are the stats :
- China: Tops the chart and produced around 32.8 million of gross tonnage. More than 50% of the global capacity is based out of China only.
- South Korea: holds the second position and has around 29% of the global market pie and has produced around 18.3 million CGT. CGT stands for compensated gross tonnage. It is a unit of measurement to gauge the amount of work required to build a ship. It also indicates the level of shipbuilding output.
- Japan: Contributes about 15% to the global total, producing roughly 10 million CGT last year.
The same stats are reflected in the graph referenced above. These stats show how these countries dominate the world. Meanwhile, the other so-called developed countries are nowhere in the scene. This includes vessels like large tankers and container ships. These vessels add to the strategic importance of this industry for world merchandise.
Reasons for the dominance of these countries in Ship building Industry
- Support from Native Governments: Governments of these countries have provided many benefits to support this industry. They offer several policy benefits as well. For example China has provided benefits to companies who have invested to modernize their ship building facilities
- Industrial Powerhouse: All three are export-oriented economies. It’s logical for them to build ships. This enables them to move up the supply chain and start exporting their goods by themselves. For example China exports of goods and services is around 20% of its economy and is enormous
- Technology Know How: All three countries have invested heavily in research and development and have consistently improved their technological capabilities
- Availability of Cheap and Skilled Labor: These countries are from East Asia. They are known for the availability of cheap labor. The labor is also very skilled. For instance China boasts the largest number of skilled laborers in the world.
China has particularly consolidated its position in the last 10 years. Its global percentage increased from around 35% in 2014 to 51% in 2023.
Challenges to their Dominance
- Diversification of supply chain: Due to COVID pandemic, the faultiness of global supply chains got exposed. Dependence on individual countries has prompted world political and corporate leaders to consider diversifying their supply chains. This has led to a global revamping and some of the major companies are looking for new avenues. For example, Apple has opened a new development center in India to make sure they have a diversified manufacturing base.
- Geo-Political Landscape: The Geo-political landscape has changed in recent years. Western countries are looking to find different sources for imports. This is particularly true about China as there is a trade war going on between the US and China
- Environmental Factors: Like other travel industries, shipping is under a lot of pressure to limit their carbon footprint. The next decade will be very important. More and more ships need to move to non-polluting sources of energy. This might lead to emergence of new players in the market over a next decade.
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