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Shipbuilding industry ushers in a new round of super cycle of updates and replacements

Overlooking Nansha Port from the top of Longxue Mountain in Nansha, Guangzhou, cargo ships slowly sailed into the depths of the sea. At the foot of Longxue Mountain, there are numerous gantry cranes and machines roaring. The construction of the 16000 container ship with the largest tonnage in South China has entered the final stage. Nearby, orderly arranged hulls are waiting for welding. Ports, docks... a bustling scene. Currently, the company holds orders for 25 automobile transport ships, and shipbuilding orders have been arranged until 2026, "Zhou Xuhui, Deputy General Manager of Guangzhou Shipbuilding International Co., Ltd., told China Securities News.

Recently, a reporter conducted a survey and found that domestic brand cars have a rapid trend of going overseas, and the automotive transport ship market is showing a hot situation of "one ship is hard to find". The shipbuilding industry is ushering in a new round of super cycle of updates and replacements. Chinese shipbuilding enterprises are seizing market opportunities, exploring high value-added ship products, increasing research and development of new energy ship products technology, extending the industrial chain, and promoting high-quality development of the shipbuilding industry.

Shipbuilding orders scheduled for 2026

As a subsidiary of the listed company China Shipbuilding, Guangzhou Shipbuilding International Automobile Transport Ship currently holds the world's largest number of orders.

It only took Guangzhou Shipbuilding International two and a half years from starting from scratch to achieving the highest order volume for automobile transport ships in hand, "Zhou Xuhui said. In 2021, the company noticed a surge in automobile exports, with the average price increase of automobile transport ships being the largest among various ship types. Therefore, the company has increased its investment in entering the automotive transport ship race.

Why are orders for car transport ships exploding? Zhou Xuhui said, "The trend of Chinese automobile companies' products going overseas is not decreasing, and there is not enough vehicles for cars to be transported overseas. At the same time, the average price increase of automobile transport ship orders is higher than that of container ships, oil tankers, and bulk carriers. The shortage of transportation capacity and rising prices have shown many shipping companies business opportunities

Recently, there have been new customers coming to negotiate cooperation and asking if the company can take on orders in the second half of the year. However, the company's existing production capacity is already saturated, and the production schedule for new orders has reached 2027 or even further. "Zhou Xuhui introduced.

It is worth mentioning that in addition to shipping companies grabbing new orders, car companies have also established their own maritime transportation teams. The two car transport ships we built for BYD are currently under contract, "Zhou Xuhui told reporters." In recent years, the company's customer structure has undergone significant changes, from all shipping companies to half shipping companies, half end users and financial and asset operation enterprises, and many end users have placed their own orders for ships

Since the beginning of this year, China's automobile exports have significantly rebounded. According to data from the China Association of Automobile Manufacturers, the export of complete vehicles from January to June was 2.14 million, a year-on-year increase of 75.7%. The export of new energy vehicles reached 534000 units, a year-on-year increase of 1.6 times.

Industry insiders have stated that the current wave of orders for automobile transport ships has started since 2021. As domestic cars accelerate to sea, new orders for global car transport ships are quietly shifting to Chinese shipyards. Previously, automobile transport ships were mainly manufactured in Japan, and in the past three years, 90% of new orders for automobile transport ships have been taken over by Chinese enterprises, "Zhou Xuhui said.

In addition to car transport ships, the number of new orders for ro/ro passenger ships also continued to rise in the first half of the year. Zhou Xuhui said, "In the first half of this year, the company's business orders increased by 90% year-on-year. Currently, Guangzhou Shipbuilding International holds over 70 shipbuilding orders, with a value of over 50 billion yuan

On July 12th, the world's largest tonnage cruise ship, the MOBY, docked at the Nansha International Cruise Home Port in Guangzhou, and workers were busy installing the interior. This luxury Ro/Ro passenger ship will be delivered to the Italian shipowner in August, capable of accommodating 2500 guests or carrying large vehicles and cars that can occupy a 3800 meter lane, "said Peng Yonggui, Senior Business Manager of Guangzhou Shipbuilding International Office.

After experiencing the peak orders in 2021 and 2022, the current demand for new container ship orders has declined, "Chen Lei, General Manager of the Ship Market Department of China Shipbuilding Huangpu Wenchong Shipbuilding Co., Ltd., told reporters. Huangpu Wenchong is a subsidiary of China Shipbuilding Defense Holdings, a listed company, and also a major construction base for regional container ships in China.

According to data released by the Ministry of Industry and Information Technology in July, from January to June 2023, the national shipbuilding completion volume reached 21.13 million deadweight tons, a year-on-year increase of 14.2%; The total number of new orders received nationwide was 37.67 million deadweight tons, a year-on-year increase of 67.7%; As of the end of June, the national handheld order volume reached 123.77 million deadweight tons, a year-on-year increase of 20.5%, with all three major indicators ranking first in the world. The international market share of new orders has exceeded 70%, setting a new record for the international market of China's shipbuilding industry.

Developing "Three High" Ship Products

In recent years, the efficiency of shipyards has been much better than in the past. By producing high-tech, difficult, and high value-added 'three high' ship products, domestic ship construction has gradually broken away from low-level competition and entered the global high-end market. "said Chen Fei, Deputy Secretary of the Huangpu Wenchong Party Committee. It is understood that the "three high" ships mainly include LNG ships, large dredging ships, special operation ships, unmanned ships, large luxury yachts, large container ships, etc.

At present, China's shipbuilding industry is in an important period of transformation from large to strong. Since the joint restructuring of the "two ships", China Shipbuilding Group has focused on its main business, accelerated technological self-reliance and self-improvement, and deeply implemented a high-quality development strategy.

Chen Xiaoliang, General Manager of Yinghui Southern Shipbuilding (Guangzhou Panyu) Co., Ltd., stated that in the future, China's shipbuilding industry will transform in three directions: firstly, the industrial structure will further transform towards high-tech and high value-added green products; The second is to transform towards digital and intelligent manufacturing, improving efficiency and reducing labor costs; The third is to transform towards the autonomy of core supporting equipment and improve the layout of the shipbuilding industry chain.

Ship enterprises firmly grasp the "nose of innovation" and promote the continuous improvement of industrial level. Chen Xiaoliang told reporters that aluminum alloy ship products are high value-added ship types, with a profit level about 5 percentage points higher than the overall level of the shipbuilding industry. The company is the earliest shipbuilding enterprise in China to build aluminum alloy ships, capable of independently designing and developing aluminum alloy main ship types such as high-speed passenger ships, yachts, wind power operation and maintenance ships, and port pilot ships, filling the gap in this field in China. Currently, the company has become the 'specialized, refined, and new' enterprise with the highest delivery volume, export quantity, and domestic market share of aluminum alloy ships in China.

Due to the difficulty of construction, LNG gas ships are known as one of the "three jewels in the crown" of the shipbuilding industry. Small and medium-sized gas ships are mainly used for medium to short distance transportation, including unloading and transportation of large gas ships, regional trade transportation, and other scenarios. The market prospects are promising and the potential is enormous. As a necessary extension and supplement to China Shipbuilding Group and China's shipbuilding industry chain, Huangpu Wenchong will further expand and strengthen small and medium-sized gas ships in the future, "Chen Fei said.

Targeting timing and changing the track have created opportunities for shipyards to tap into profit margins.

For Guangzhou Shipbuilding International, which currently has the world's largest number of orders for Ro/Ro passenger ships, the process of developing Ro/Ro passenger ships has not been smooth sailing. We started building Ro/Ro passenger ships in 2001, but due to the reliance on imports for technology, equipment, and installation, we took many detours and paid a lot of 'tuition fees', "Xiao Zhijian, director of Guangzhou Shipbuilding International Company, told reporters.

In order to reduce shipbuilding costs and improve production efficiency, Guangzhou Shipbuilding International has gradually expanded from increasing localization rate to self research in technology. We have found that some domestic products can also meet the requirements and have developed a supply chain system in the Pearl River Delta region, so we can take a leading position in the design and technical negotiation process. At the same time, the company has increased research and development investment, going through the process of outsourcing design, joint design, and independent research and development. In the field of luxury ro-ro ship design and construction, we have successively conquered weight and center of gravity control technology, vibration and noise control technology, and safety and safety technology Key core technologies such as full return technology have finally formed a flagship product According to Xiao Zhijian, the interior decoration of MOBY luxury ro/ro passenger ships has achieved 100% localization throughout the design, manufacturing, and installation process.

Zhou Xuhui stated that in the first half of this year, Guangzhou Shipbuilding International achieved "double over half" industrial output value and profit, and "we delivered multiple luxury Ro/Ro ships and new energy ships to achieve profit targets

Through independent design, the ship design cycle is significantly shortened and the construction efficiency is significantly improved. In the first half of this year, several independently designed and fully intellectual property owned "Honghu" series feeder container ships from Huangpu Wenchong were successfully delivered, with some new ships being delivered nearly a hundred days earlier than the agreed time in the contract. Chen Fei said, "The proportion of companies delivering ships in advance is increasing, thanks to the company's improved production preparation system and improved production management efficiency." It is understood that China is the largest producer of regional container ships, with a global market share of over 60%.

Seize the opportunity of green ships

The goal of carbon reduction has a profound impact on the direction of the shipbuilding industry. "The civil shipbuilding industry, including 'bulk, oil, tank and gas', has a strong desire to reduce carbon, which is driven by the world's leading customers. For example, Wal Mart in the retail industry, BYD, Volkswagen, Mercedes Benz and BMW in the automotive industry have all started to use new energy ships for transportation." Zhou Xuhui said.

There is a high demand for new energy ship types, and in the first half of this year, we signed 8 methanol dual fuel branch container ships, "said Chen Lei. Zhou Xuhui also stated that Guangzhou Shipbuilding International currently has nearly 40 ships, with a total value of 20 billion yuan, with orders for high-tech, high value-added methanol dual fuel or LNG dual fuel new green ship types.

The Preliminary Strategy of the International Maritime Organization (IMO) clearly states that by 2030, the average carbon emission intensity of the global shipping industry will be reduced by at least 40% compared to 2008, and efforts will be made to reduce it by 70% by 2050. The total annual greenhouse gas emissions of the shipping industry will be reduced by at least 50% from 2008 by 2050.

In 2005, the global shipbuilding industry bid farewell to the super cycle, and after nearly 20 years of digestion, it is currently in the golden period of ship product upgrading. Zhou Xuhui stated that the service life of ships is around 20 years, and the performance of ships produced in the previous super cycle is much lower in terms of energy consumption, safety, functionality, technology, and other aspects. Heavy oil ship types are facing large-scale elimination, prompting the arrival of new orders in bulk.

In fact, there is a process of ship renewable energy, and the update speed varies among different ship types.

Some ship types can meet carbon emission standards through modification, which has led to a demand for ship maintenance and renovation, "Chen Lei told reporters. In addition, the insufficient supply of new energy and the lack of mass production of related new energy engines have become constraints for the conversion of new ship power from traditional energy to new energy.

Therefore, shipbuilding enterprises should fully consider the future green upgrade needs of ships in the process of designing new products. Among the 19 new orders in the first half of the year at Huangpu Wenchong, 8 ships have been reserved for new energy fuels such as methanol or ammonia, which are eligible for direct transformation. The MOBY luxury Ro/Ro passenger ship built by Guangzhou Shipbuilding International also has a reserved design for LNG for future upgrades to the "LNG+MGO (Marine Diesel)" dual fuel system.

The trend of ship upgrading is inevitable, and the demand is expected to continue for 5-10 years, "Zhou Xuhui said. Incremental customers such as automotive companies are currently ordering new energy ship types, which will force traditional industry customers to switch to new ships. Once market demand drops, new ships will still be the "hot cakes" in the shipping market, while old ships may not be sought after. After all, the new ship has higher cost-effectiveness, better performance, better safety structure, and lower carbon emissions, "Zhou Xuhui said.

Regarding the trend of new energy in the shipbuilding industry, Chen Xiaoliang stated that the industry is still exploring whether to use alcohol fuel, ammonia fuel, or gas fuel. Domestic enterprises should actively participate in global discussions on ship energy upgrading, formulate development plans, and conduct early research on green ship technology. "The company is gradually entering the field of pure electric ships, and will deliver a 402 passenger seat pure electric the Pearl River tourist ship in October this year." Chen Xiaoliang said.

Industry insiders have stated that China's development in the field of green ships basically meets the current IMO environmental protection requirements, but there is still a certain gap in forward-looking research on green environmental protection for the future with higher requirements compared to EU member states, Japan, South Korea, etc. It is necessary to seize the critical period of green ship technology research and development from 2020 to 2030, and promote the transformation and upgrading of China's shipbuilding industry from large to strong.

Contact hotline: 13124855264 Manager Xu


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