Shipbuilding Supercycle

Environmental regulations, defence imperatives and a recovering global economy are driving shipbuilding demands to a new level — creating lucrative opportunities for shipyards, old and new, around the world.

Shipbuilding is entering a period of significant and sustained growth globally, leading to major international investment initiatives. A recent report by Allied Market Research predicts expenditure on new-builds will rise from its 2020 level of US$142 billion to more than US$195 billion by 2030. Paris-based shipbroker group Barry Rogliano Salles (BRS), meanwhile, anticipates that shipyards are about to benefit from a ‘supercycle’ — a prolonged period of demand-driven expansion, last seen between 2005 and 2008. While the last supercycle was driven by China’s rocketing economic performance, the next one will be propelled by shipping’s requirement to comply with strict environmental regulations, as well as a need for fleet renewals to keep up with a booming demand for global transportation. 

BRS says it spotted the first signs of the supercycle in 2021, when new-build orders began to recover dramatically, and construction prices jumped by 30% within the year.  

BRS adds that shipyards also now have a very strong upper hand due to limits of capacity.  

While 682 shipyards were operating in 2008, there are now only 275 currently open — with recent mergers meaning nine shipbuilding groups control 75 per cent of all capacity. 

Containership contracts

Chinese shipbuilders have started to pick up the lion's share of all contracts, according to data from IHS Markit Maritime & Trade, fuelled by rising demand for new and bigger containerships, and highly attractive payment terms supported by state-owned banks.  

Notable recent containership contracts placed in China include Evergreen Marine Corp's order for 24 ships, up to 3,000 TEU, as part of its intra-Asia fleet replacement and expansion programme, all ordered at the Guangzhou Wenchong Shipyard. It is the first Chinese order for Evergreen, which used to have a strong long-term relationship with South Korea's Samsung Heavy Industries, and several Japanese shipbuilders before that.  

Global opportunities

The upswell in global shipbuilding demand is opening up investment opportunities in new locations all around the world.  Plans are even underway for a new shipyard on the River Thames in central London — the first to open in the UK’s capital for more than a century. 

“The Thames has seen a renaissance over the last decade, with investment in new vessels and services of all kinds, and this new shipyard will put essential repair and maintenance at the heart of this busy river,” says Port of London Authority chief executive, Robin Mortimer. 

The UK government has also launched a new £4 billion shipbuilding investment programme to support the construction and delivery of more than 150 commercial and naval vessels over the next 30 years, including large warships, such as Type 26 and Type 31 frigates, as well as Border Force cutters, lighthouse vessels and the new National Flagship. 

Meanwhile, on the other side of the Atlantic, one of the world’s most successful shipbuilding groups, Trieste-based Fincantieri, has agreed to build and maintain ships at a new US$150m shipyard on the Yucatan peninsula in Mexico. Consisting of two dry-docks, able to accommodate ships up to 400m in length, it will be the largest shipyard in Latin America.

Port of London Authority River Thames shipyard (Credit: PLA)

Australian ambitions

Naval concerns are also driving strong demand for new shipyard facilities around the globe. 

In Australia, the federal government is investing US$ 3 billion in the country’s first large-vessel dry dock, to be located at the existing Henderson shipyard in Western Australia.  

The government has also committed to spending more than US$367m in brand new shipyard infrastructure at the long-established Osborne shipyard in Adelaide, South Australia, for the construction of a fleet of eight new nuclear-class submarines, due to enter service from the beginning of 2030.

Chinese expansion

China, however, is expanding its naval shipbuilding capacity at a scale far greater than any other nation, having significantly increased the size of one of its leading shipyards — Hudong-Zhonghua in Shanghai — to facilitate the construction of a wide range of warships, frigates and assault vessels, as part of its enormous Changxing Island Shipbuilding Base Project, under the direction of the China State Shipbuilding Corp (CSSC). 

Nearby facilities of another major shipbuilder — Jiangnan Shipyard — have also been massively expanded recently by the CSSC. US Navy intelligence experts believe that parts of the new Jiangnan facility are now being used by China to build a fleet of four new state-of-the-art nuclear-powered aircraft carriers, expected to be in service by 2040. 

Nuclear option

Meanwhile, in a nationwide search to expand its own maintenance capability for nuclear submarines and aircraft carriers, the US Navy is said to be considering a new site on the banks of Lake Erie, in rural Ohio. Opponents to the idea point out that all vessels getting in and out of the site would have to do so along the St. Lawrence Seaway, which relies on a number of locks to move ships along its channels.

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Dennis O’Neill is a freelance journalist specialising in maritime.