China in 2015
China is the world’s largest shipbuilding nation, providing the majority of the global bulk tanker fleet, with an order backlog worth over $80 billion. However, the bulker market is in decline, due to overcapacity caused by the increase of megaships and an overall decline in global shipping. As the market reshapes itself, China needs to reposition its offering and go head-to-head with Korea, which leads the value-added, high performance shipbuilding market.
This means that in order for China to sustain its shipbuilding market share, it must shift focus to produce more high-end vessels, including exploration and research vessels and LNG carriers (LNGC), in line with the government’s “Made in China 2025” industrial plan. Investing in LNGCs will also give China more control over its supply chain, as it moves to serve its new gas import terminals.
Reshaping China’s Shipyards
In February 2014, it was predicted that 30% of China’s 1,647 shipyards would close over the next few years. The Ministry of Industry and Information Technology has introduced a document, called Issue 55, which sets out the government’s plans to modernise the country’s shipbuilding sector. New industry guidelines with tougher environmental, safety and employment regulations, will hit small and medium sized shipyards the hardest. Any shipyard that fails to meet the requirements of the new legislation could see their licenses revoked.
Before Issue 55, China was able to produce ships at a fraction of the cost of its biggest rivals – South Korea and Japan. However, the new shipbuilding framework clearly shows that the Chinese Government now plans to go head-to-head with South Korean and Japanese shipbuilders, focusing on producing high-tech vessels.
To achieve this focus on high-spec segments, the Ministry announced in July the creation of the so-called ‘White List’, to support the goal of increasing offshore fabrication. The list will include select yards with the capabilities to produce platforms and rigs, and with a required commitment to technology investment.
Technology at the forefront
Chinese shipyards will design vessels with technology at the forefront in order to reduce operator costs over time as well as build greener, more efficient ships.
This can be achieved by using software analytics optimizing the design from the offset, analyse a vessel’s anticipated operational profile, and improve data-driven operation efficiency. GE is leading this industrial transformation with products such as SeaStream* Insight. The software will be powered by Predix*, a cloud-based platform that is uniquely designed for industrial applications.
By leveraging big data, advanced manufacturing combining software and analytics we can create new production processes to improve efficiency on the factory floor. Its what GE calls the “Brilliant Factory” and it can transform China’s shipyards. In such factory supply chains, distribution networks, and servicing units are digitally connected, reducing cycle time and improving quality.
GE Marine is also investing in China’s LNG carriers, providing its gas turbine-based COGES (COmbined Gas turbine, Electric and Steam) system as part of a collaboration with Dalian Shipbuilding Industry Company (DSIC) to build a gas turbine-powered LNG carrier. The design will allow more room for cargo, along with other additional benefits such as low emissions and the flexibility to operate on LNG or liquid fuel.
China in 2025
The government’s “Made in China 2025 plan” is ambitious, but many of the right steps are being taken to ensure it is delivered. The new, tougher Issue 55 legislation will drive an evolutionary process, where only the safest, most efficient, most environmentally friendly shipyards will survive. The Issue 55 legislation, shift in shipbuilding focus, along with the planned merger of China’s two shipping giants – COSCO Group and China Shipping Group (CSG) – shows that the country is committed to competing in the marine industry over the long term and at a global level.
* Indicates a trademark of the General Electric Company and/or its subsidiaries.