The Chinese shipbuilding industry is the largest globally and a third of yards with a vessel on order (1,000+ dwt) are located in China (148 shipyards). Last month, the Chinese government published a ‘White List’ of domestic shipbuilders whose market capacity it wishes to support. In light of this, October’s Shipbuilding Focus takes a look at the shipbuilding activity of the 50 shipyards currently on the ‘White List’.

The ‘White List’ To Be On?

The criteria for the ‘White List’ is largely based on a shipyard’s facilities and equipment. It does not take into account the financial health of the yard, hence shipyards reported to be in financialtroubles may be on the list. In total, the ‘White List’ includes 15 state owned yards as well as 33 private yards and 2 joint ventures, most of which are larger, established shipbuilders. With the recent pressure on Chinese banks to moderate their lending and some of the smaller yards reportedly struggling to obtain refund guarantees, the ‘White List’ provides a guideline for domestic banks, although it is reported that many Chinese banks have stricter criteria

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Dragon’s Share Of The Market?

As the line on the Graph of the Month shows, ‘White List’ yards have accounted for the majority of tonnage output by Chinese shipbuilders since 2006. On average, ‘White List’ shipyards delivered 4.4m CGT p.a. between 2005 and 2009, accounting for 55% of deliveries by Chinese yards over the period. Whilst ‘White List’ yards’ share of Chinese deliveries fell from 61% in 2010 to 57% in 2012, this was due to a large number of small deliveries by new yards established during the contracting boom. This is illustrated by the fact that a ‘White List’ yard, on average, delivered 0.24m CGT p.a. between 2010 and 2012 whilst ‘Other’ shipyards output an average of just 0.04m CGT p.a. per yard. In the ytd, the 50 shipbuilders on the ‘White List’ are reported to have output 7.9m CGT, 72% of Chinese deliveries and over seven times as much tonnage as output by the ‘Other’ 77 yards in 2014 so far.

Stronger Future?

Looking forward, there are signs that shipbuilders on the ‘White List’ will see their share of Chinese output increase further. At the start of October 2014, ‘White List’ yards accounted for 73% of the 47.4m CGT on order at Chinese shipyards and 30% of the volume of tonnage on order globally. Whilst bulkcarriers are still the main product for Chinese shipbuilders, the ‘White List’ yards typically take the majority of orders in China for the more complex, higher CGT vessel types. Currently, ‘White List’ yards account for all of the 8,000+ TEU containerships on order in China and 97% and 91% of the gas carrier and VLCC orderbooks in terms of CGT respectively. In contrast, ‘Other’ yards are mainly focused on less complex and also smaller vessel types.

Evidently, ‘White List’ yards represent a significant part of the Chinese shipbuilding industry. With the state announcing its support of these yards, it’s likely that a large part of current shipbuilding capacity in China will be maintained, and more yards may be added to the list. Moreover, on the basis of the current list alone, these yards’ share of shipbuilding activity in China is clearly set to grow.