Current and Future Perspectives of the Global Shipbuilding Market

Question: Write an essay on the current and futureperspectives of the global shipbuilding market. Answer: 1. Introduction Shipbuilding industry is one of the oldest heavy industry in the global market where very few companies are operating their business. The market of shipbuilding is associated with the different kind of ships production that is ships, specialized vessels for several commercial and governmental usages (Hadzic et al. 2015). The current market of shipbuilding is changing from last 10 years and the demand for the passenger ships is becoming low due to low speed however, the commercial use of the ship as a commodity carrier is growing day by day because of its capacity. Business globalization has increased the movement of the commodity in a large number from one location to other. Ship is the best option to supply huge number of goods. The objective of this paper is to understand the current global shipbuilding market and predict the future trend. 2. Market Overview Shipbuilding market throughout the globe is changing its dimensions because of the change in the nature of the product. In the past, the demand of the passenger ship was good because of the low cost due to huge capacity but in the recent time the market is experiencing very low demand of passenger ship whereas container ships is in high demand. The total market of the shipbuilding industry is 258.1 billion dollar, which includes passenger ship, carrier ship and ship for government use (Yu and Lindsay 2015). Companies like Hyundai Heavy Industries, Mitsubishi Heavy Industries, Samsung Heavy Industries, China Shipbuilding Industry Corporation, STX Group and DSME are the market leader with most of the contribution in the global market (Cornel, Filip and Catalin 2013). Figure 1: Major players of global ship building industry (Source: Mickeviciene, 2016) The shipbuilding market is huge and the global market is associated with the demand of different type of ship that are container ship, bulk carrier, Tanker, cruise ship and specialized ship. Among them specialized ship is more in demand by several governments in different countries due to their defense requirement moreover the demand of the cruise ship is also increasing in recent time due to the boom in the tourism industry. Moreover, Oil Company and other commodity companies use the tanker and carrier ship for their business (Rivas-Hermann, Kohler and Scheepens 2015). Ship building industry is also associated with the ship repairing which is also a good revenue generator. Figure 2: Share of different countries in shipbuilding and delivery (Source: Khare 2016) Figure 3: Share of vessel types of different countries (Source: Khare 2016) 3. Global Shipbuilding Market Analysis The shipbuilding business is in charge of the configuration and development of oceangoing vessels all around the globe. The shipbuilding business is included in the development and alteration of boats and these operations are completed in particular offices called shipyards. The business constructs ships for business and in addition military purposes. Figure 4: The balance of world shipbuilding market (Source: Mickeviciene, 2016) The vast majority of the worldwide boat generation is amassed in Asian nations, for example, China, Japan and South Korea, however substantial shipyards additionally exist in numerous different nations (Kulkarni 2015). Shipbuilding is thought to be one of the most established, most open and much focused markets on the planet. Despite the fact that shipbuilding industry has incomprehensible encounters in surviving crests and droops of economy, the current worldwide emergency has hit shipbuilding industry all the more extremely. Solid government support and political security is required in this industry with more capital investment by the companies involved in the business. The key elements driving the development of the business sector are worldwide seaborne exchange, enhanced monetary development, raising urbanization and expansion in worldwide steel creation. A portion of the imperative patterns and improvements of this industry are green shipbuilding innovation, propelled equipping, ship dispatching airbag, LNG energized motors and solar and wind controlled boats. Notwithstanding, the development of shipbuilding industry can be influenced by expanded rivalry, ecological directions and political and money related precariousness (Cornel, Filip and Catalin 2013). The current market trend is in the declining stage due to lot of labour problem and lack of investment therefore most of the company are focusing on the establishment of the manufacturing unit in the Asian region. Figure 5: Value Chain Analysis of Shipbuilding Industry (Source: Mickeviciene 2016) Asian region is able to provide suitable low cost labour to the industry therefore the cost of operation will come low. The economic downturn also resulted low in demand due to low business volume throughout the globe. The current market is shifting from the Europe to Asia and China and Korea is leading the market in this segment. The large player in this industry belongs to China, Korea and Japan therefore the economic contribution of these companies to their country is also high (Shin and Ciccantell 2015). The low demand in the ship market will result in the loss of job that will affect the countrys economy also. 4. Global Shipbuilding industry performance Very few companies are associated with the shipbuilding industry therefore if we analyze the market performance then it is evident that more number of are coming to the shipbuilding company every years that includes the repairing job (Turan and Cengiz 2015). The amount of the repairing job is more as compared to the new order. Every company is responsible for the repairing job of their old customer therefore more time is given in the repairing job, which blocks the work of the new order. The trend of the market is clearly identifies that none of the shipbuilding company is able to supply their products in time however the success rate is as low as 50% (Mickeviciene 2016). Therefore it can be stated that the infrastructure of the shipbuilding company is not up to the mark because of the low performance that is also affecting the industry. Every company should make separate site for the maintenance and new shipbuilding so that they can make timely delivery to the customers. Million CGT /year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Order book 45.9 48.3 48.9 70.8 92.8 107.2 138.0 183.7 194.2 156.2 134.9 New orders 29.4 23.3 20.5 41.7 45.1 39.6 57.3 85.3 43.0 16.6 26.3 completion 20.3 20.2 21.4 22.8 25.5 29.4 34.1 34.6 41.9 44.4 40.5 Table 1: World shipbuilding results in CGT during 1999-2010 1-3 Quarter (Source: Mickeviciene 2016) 5. Future trend of global shipbuilding industry Figure 4: Global shipbuilding order book deliveries (Source: Khare 2016) The shipbuilding companies are getting good government support to increase the employment in the industry however, the market is not allowing at the moment. The sale in 2003 was the lowest in last 20 years history but the current trend is expected to grow in the near future. The global economy is recovering and most of the business is in the rise that is a good sign for the ship building industry. The demand of tanker however will remain low because of the usage of renewable energy that results in less demand of oil transportation (Jiang, Bastiansen and Strandenes 2013). The market is also affected by the increased cargo delivery through the air transport system, which is faster and more efficient than ship carrier is. The below figure is indicating that the shipbuilding industry is experiencing a low demand high supply however the recent change in the global economy is expecting to narrow the gap and more number of ship will be used to carry the goods from one country to other. 6. Conclusion From the above discussion, it can be summarized that shipbuilding industry is highly related to the world economy because if the business throughout the globe is increasing then only the shipbuilding industry will be growing. However, the infrastructure of the shipbuilding company is also hindering the growth because they are wasting their time in repairing job and new orders are being delayed. The current market trend of the industry is also good and is expected to grow in the near future due the global economy reformation. 7. Reference List Cornel, G., Filip, N. and Catalin, P., 2013. Crisis Effects on Shipbuilding Market.Ovidius University Annals, Series Economic Sciences,13(2). Cornel, G., Filip, N. and Catalin, P., 2013. Crisis Effects on Shipbuilding Market.Ovidius University Annals, Series Economic Sciences,13(2). Hadzic, N., Tomic, M., Vladimir, N., Ostojic, S. and Senjanovic, I., 2015. Current state and perspectives of the Croatian shipbuilding industry.Journal of Naval Architecture and Marine Engineering,12(1), pp.33-42. Jiang, L., Bastiansen, E. and Strandenes, S.P., 2013. The international competitiveness of Chinas shipbuilding industry.Transportation Research Part E: Logistics and Transportation Review,60, pp.39-48. Kulkarni, P.R., 2015. Review of Global Naval Shipbuilding Trends and Lessons for Indian Shipbuilding Industry.Maritime Affairs: Journal of the National Maritime Foundation of India,11(1), pp.116-132. Mickeviciene, R. (2016). Global Competition in Shipbuilding.Trends and Challenges for Europe, 11, pp.201- 212. Rivas-Hermann, R., Khler, J. and Scheepens, A.E., 2015. Innovation in product and services in the shipping retrofit industry: a case study of ballast water treatment systems.Journal of Cleaner Production,106, pp.443-454. Shin, K.H. and Ciccantell, P.S., 2015. The steel and shipbuilding industries of South Korea: rising East Asia and globalization.Journal of World-Systems Research,15(2), pp.167-192. Turan, E. and Cengiz, H., 2015. Turkish shipbuilding industrychallenges and potential.Brodogradnja,66(4), pp.87-101. Yu, Y. and Lindsay, V., 2015. Export commitment and the global financial crisis: Perspectives from the New Zealand wine industry.Journal of Small Business Management.