The potential of the Chinese market for Wartsila is seen not just from the sheer size of the shipbuilding market but also from the country’s sustainable economic growth outlook on the back of rapid urbanisation and a huge domestic market, according to Han.
China held the number one position globally for new orders during the first quarter of 2017 with 41% share in number of vessels and 28% share in compensated gross tonnes, according to figures from China Association of the National Shipbuilding Industry (Cansi).
At present, Wartsila already has a strong foothold in China through five joint ventures with state-owned enterprises (SOEs), three fully-owned companies and seven service stations.
Among the joint ventures are Wartsila CME Zhenjiang Propeller Co, Wartsila Engine (Shanghai) Company (CWEC) and Wartsila Electrical & Automation Shanghai Co formed with China State Shipbuilding Corporation (CSSC), and Wartsila Qiyao Diesel Company formed with China Shipbuilding Industry Corp (CSIC).
“We are also looking at partnership opportunity with Cosco Shipping Heavy Industry but nothing has been finalised yet,” Han told Seatrade Maritime News. He added that Wartsila has no plans so far to collaborate with privately-owned Chinese yards but the group’s strategy is to “work with strong players in the market”.
The protracted downturn of China’s shipbuilding sector has forced many previously well-known privately-owned yards to their knees, including China Rongsheng Heavy Industries and Sinopacific Shipbuilding Group. State-owned CSSC, CSIC and Cosco Shipping Heavy Industry, on the other hand, will survive and dominate the market as the government has a duty to support these SOEs as part of social responsibility in terms of jobs creation, Han explained.
“But the excessive shipbuilding capacity remains a problem for China and further consolidation is needed for the sector,” he said.
Han noted that the creation of the merged Cosco Shipping has helped consolidated a portion of yard capacity previously operated separately by the then China Cosco Group and China Shipping Group.
The formation of Cosco Shipping Heavy Industry under Cosco Shipping has led to plans to shut down three out of five offshore shipyards. The grand plan for Cosco Shipping Heavy Industry is to bring down its combined yard capacity from 11.55m dwt to 10.6m dwt by end-2017 and further down to 9.6m dwt by end-2020.
On the part of CSIC, the group consolidated some of its subsidiaries by placing Shanhaiguan New Shipbuilding Industry under Dalian Shipbuilding Industry Co, and merged Wuchang Shipbuilding Industry Group under Qingdao Beihai Shipbuilding Heavy Industry.
CSSC also consolidated Longxue and Huangpu Wenchong shipyards under a rebranded CSSC Offshore & Marine Engineering (Comec).
The consolidation moves by the SOE yards show the resolve of Beijing to trim down yard capacity while maintaining financial support for them. The key SOE yards have also embarked on ongoing transformation toward high-end and more sophisticated vessel building such as cruise ships, Han shared.
According to data from Clarksons Research, China is expected to further strengthen its position as a shipbuilding giant through increasing consolidation, with the top 10 Chinese builders projected to account for 70% of total output in 2020. Clarksons also expects China to overtake Japan as the second largest shipowning nation by 2020.