For two decades China has been the driving force behind global industrial growth and the demand for shipping capacity. But, its recent dip in growth has been accompanied by some significant trends; bigger increases in consumption and services, less in investment and manufacturing. This is the classic trajectory of a developing economy and shipping is a classic service industry. Just how big is China's role as service provider to the shipping industry likely to be?
Service at the Double…
While China has been generating something like 50% of the growth in demand for shipping capacity over the last decade, it has also made significant inroads on two aspects of the service side of the industry. First, Chinese-built vessels are providing a rapidly growing proportion of the fleet that services the shipping industry. Secondly, China has been growing its own fleet.
Build and Carry…
Since 2010 China has been the pre-eminent shipbuilder, accounting for almost 40% of all deliveries. Chinese-built vessels now account for 20% of the global fleet, almost 11,000 vessels. Moreover, China still holds almost 40% of the current orderbook, about 6% of the world fleet. The average age of the Chinese built fleet is a youthful 7.6 years compared to a global figure of 20.3 years, so relatively little is going to be scrapped soon. Chinese-built vessels are going to become an even more prominent feature of the global shipping scene, quite soon a quarter of the total.
Own and Carry.
China last year passed a milestone when its fleet reached 100m GT. The 6,300+ vessel Chinese fleet now accounts for 10% of the total. Its numbers have increased by 58% since 2005 and its capacity by 280%. That’s twice as fast as the world fleet in numbers and 3.7 times its capacity growth. China now sits only behind Japan and Greece, each of which has about 14%, as an owner of capacity.
The average age of the Chinese-owned fleet is 16.7 years. Few of the diversified major owners have younger fleets – e.g. Japan 14 years, Greece 16 years. Again, scrapping seems likely to be a lesser feature of the Chinese fleet. In contrast, deliveries of Chinese-owned tonnage will feature large; 13.4% of the total orderbook equivalent to 21% of their existing fleet is Chinese-owned. By 2014, the Chinese fleet could account for 12% of the global fleet.
Cash (in) and Carry…
For the foreseeable future, China will be pivotal for global economic growth and the demand for shipping. But as its economy matures it will also cash in on service sectors like shipping. The super-boom allowed China to carve out a prominent position, up to 25% of capacity built in China and 12% Chinese-owned. As the lead builder and owner (albeit of a smaller volume) of contracted tonnage this year, a slower but persistent trend is emerging. The take away Chinese service looks like becoming a take-over.