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Japan’s rise in shipbuilding orders dwarfed by Asian rivals

A rebound continues for Japanese shipbuilders as new-order capacity rose on the year for a 10th straight month in October, but these manufacturers are firing volleys at heftier rivals in South Korea and China whom they say receive unfair government assistance.

The Japanese companies booked new orders for 22 vessels last month totaling 890,300 gross tons of capacity — up sevenfold from October 2016, the Japan Ship Exporters’ Association said Wednesday. The vessels are bulk carriers for transporting resources, grains and other goods.

These additions lifted the total orderbook at Japanese shipbuilders to 27.2 million gross tons at the end of October, the first month-on-month increase in 22 months. The backlog had been declining because delivery volumes exceeded new orders.

“Vessel prices have bottomed out, particularly for smaller bulk carriers,” said the president of one shipbuilder, noting that he is instructing his sales team to boost marketing activity.

Yet business conditions are improving even faster for peers in South Korea and China.

While Japanese shipbuilders received orders for 1.84 million gross tons between January and September, Chinese players secured 6.19 million gross tons and South Korean rivals snared 11.98 million, research company IHS said. The figure for Japanese companies does not match the JSEA data due to differences in tabulation methods.

But “what’s certain is that we lag far behind South Korean and Chinese companies,” said an official from the Shipbuilders’ Association of Japan industry group.

South Korean and Chinese shipbuilders are ringing up orders while benefiting from government assistance, sparking an outcry in Japan.

“It obstructs a fair competition environment, and Japan should issue a formal protest,” President Yukito Higaki of Imabari Shipbuilding said at a Shipbuilders’ Association meeting in late September. The normally quiet man criticized Seoul and Beijing for pouring out huge amounts of public funds to help shipbuilders in their countries offer low rates to win orders.

Such practices should be made an issue when representatives from the U.S., Europe, Japan, South Korea and China gather for a shipbuilder summit slated for Thursday in the U.S., said association Chairman Yasuhiko Kato, adviser at Mitsui Engineering & Shipbuilding. Kato and other members were perhaps motivated by the unusually outspoken Higaki.

Seoul this spring approved an additional bailout totaling up to 2.9 trillion won ($2.6 billion) for the ailing Daewoo Shipbuilding & Marine Engineering, partnering with creditors such as Korea Development Bank. Daewoo subsequently secured orders for five large container vessels and five large tankers. The government also decided to back a portion of the guarantees offered for the return of the advances received, a measure to help small and midsize shipyards.

Beijing has a more blatant technique. China offers subsidies to companies that build ships on government-designated yards, prompting some European maritime carriers to pick Chinese builders. This subsidies system is said to have played a key role as Chinese players secured an order for nine container vessels of 22,000 twenty-foot equivalent units each over Imabari and other companies.