China’s shipbuilding advances threaten South Korea’s longstanding technological dominance in the industry

Even though August marked the end of its months-long streak with the largest share of the world’s shipbuilding industry, South Korea still celebrated the fact that it managed to snatch the eight orders of the month for advanced and expensive vessels carrying liquefied natural gas. (LNG).

So while China has climbed to a 14 percentage point lead over South Korea in the overall shipbuilding market, the technological advantage still lies with the latter.

But some analysts say China is starting to catch up technologically, in addition to having already overtaken Korea in volume. And to become more competitive, they argue, Korea must adapt by redefining its industrial strategies to adapt to rapidly changing global market conditions.

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Over-reliance on one element – LNG carriers – to maintain competitiveness puts South Korea in a more difficult position to respond to changes in the industry, experts warn.

Going forward, they argue, competition between China and South Korea will ultimately be decided by which country can best apply automation and artificial intelligence technologies to their shipbuilding process.

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Over the past few years, South Korea and China have been battling for position in the shipbuilding market, and there have been short and long periods in which the two have held the lead.

In 2003, South Korea overtook Japan as the top shipbuilding nation. But Korean shipyards struggled in the years following the 2008 financial crisis, seeing a sharp drop in international orders and prompting them to undertake nearly a decade of restructuring.

Yet Korean shipyards have managed to retain a significant share of the global market. And in 2018, they saw a strong resurgence as the country grabbed 40.3% of the market share, cementing it at number one until 2020, when China overtook it, according to Clarkson. Research, a British marine research company.

This domination was due to the technological superiority of Korean shipyards in the construction of LNG carriers.
In 2018 and 2019, Korean shipyards received 94% of orders for LNG carriers placed worldwide. In 2020, this figure fell to 73% and in 2021, it rebounded to 89%.

Kim Jin-ki, director of SafeTechResearch, which manufactures ship handling simulation systems, said having the latest and most advanced LNG transportation technology is extremely valuable, not only because of the cost of these carriers, but also because this technology has implications. for upcoming technology that will drive the shipbuilding industry forward.

“Technologies such as using ammonia as a fuel – which are currently the most sought-after technologies in the industry due to issues such as decarbonization – are ultimately derived from technologies for building LNG carriers,” said said Kim.

But Korean experts noted that while Korea still has a comfortable lead in the LNG carrier market, China’s shipbuilding industry is beginning to close the gap technologically.

Reports highlight China’s technological prowess [in shipbuilding] at a level of 80 to 90% of that of Korea

Woo Jong-hun, industry expert

Indeed, both countries use technology licenses from GTT, a French company, to build LNG tanks capable of storing gas at extremely low temperatures – the most distinctive feature of LNG carriers.

“Since the GTT license is a technology license and not a product, what matters most is the type of supply chains and partners you can get to create the end product. In this regard, Korea’s supply chain is ahead of China’s,” said Woo Jong-hun, a professor in the Department of Naval Architecture and Ocean Engineering at Seoul National University.

The number of Chinese shipyards capable of building large LNG carriers has recently increased from one to three, according to Woo.

“It seems that the days when Korea monopolized the construction of more than 90% of LNG carriers are over,” Woo said. “While it is difficult to accurately assess China’s shipbuilding industry from Korea, as access is blocked, various reports place China’s technological prowess at 80-90% against to those of Korea.

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Park Mu-hyeon, director of TreaBoat Research, a Korean shipping industry research firm, said that although recent local media reports have highlighted the country’s continued dominance in LNG carrier orders, the whole situation must be taken into account.

Besides the needs of LNG carriers, Park says there are fewer reasons for global shipowners to place orders with Korean shipyards. For example, when global demand for container ships nearly tripled in 2021, China grabbed 55% of orders, while South Korea got 34%.

Some experts have made suggestions on how Korea can maintain its market and technological dominance.

“The industry is expected to be at the forefront of new technologies such as autonomous navigation capabilities and environmentally friendly vessels, which are expected to dominate the shipbuilding market,” Woo said. “If the Korean shipbuilding industry is not able to make a quantum leap, a ranking change is inevitable.”

The basic principle of a market economy… does not strictly apply in China

Kim from SafeTechResearch also highlighted China’s industrial advantages.

“As Korea is a capitalist state and China is a socialist state, the basic principle of a market economy – that industries that do not make profits will be replaced – does not strictly apply in China,” he said. he declared.

However, he added that, “because the ship designs are provided entirely by a single company in China and fierce technological competition does not occur domestically, this could be a bit limiting.”

“Shipping companies around the world will eventually go to the shipyard that not only has the best ship design capabilities, but also really listens to shipowners’ needs – and that could be one of Korea’s competitive advantages. “, said Kim.
Source: The Star

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