It’s been a good week so far. Not as busy with new incoming orders as usual, because a lot of our customers are still enjoying their summer holidays. But our workshop and field service engineers did not have an idle moment the past 4 weeks. It looks that I will have to hire more staff.
That is something that is getting increasingly more difficult in China. First of all with the ship building and ship repair business still booming, everybody in the industry tries to get the best people. Salaries have been on the rise continuously in this business, with year on year increases between 10% to 15% rather the norm than an exception.
Next week I will be traveling again. First Shandong province where visits to ship yards (mainly new building yards) in Yantai and Weihai are on the program. Then to Dalian for a couple of days, before returning to Shanghai on Friday again. I will meet a lot of ship owners who are building ships on Chinese yards, and I am very interested every time in their feedback.
The feedback has been changing over time. 6 – 8 years ago there were only about 25 – 40 yards that mattered, and were reasonably ‘modern’. Owners talked about increasing quality and a trend to be able to build more complicated ships like chemical tankers, and offshore vessels.
Since that time there has been an explosion of new shipyards, and the number of yards that is building for export are close to 200. Traditional repair yards like the ones from the COSCO group, are more and more shifting to new buildings. Many have shifted to building rigs and modules for the offshore, and doing conversions of pipe laying vessels and dredgers.
A great future for the Chinese ship building industry seems a given in such a high demand market. Or did we overlook something? The feedback I have been getting in the past 6 months starts to sound different. Delivery schedules can not be met, prices are going up while quality is being compromised. Many of the new yards lack even the most basic competence or management skills. What’s not lacking is arrogance and limitless corruption.
The Chinese shipbuilding industry will have to do some massive rethinking, if they want to stay competitive. So far, shipowners have accepted inferior quality and delayed deliveries, because the prices were low. With increasing salary costs, inflated production costs due to kickbacks and ‘management fees’ from subcontractors, many owners are asking themselves what they are doing here. For some of them it seems just not worth the hassle.
I talked to a few big offshore contractors with many new building projects in China. They are fed up, and are seriously considering to move their half finished ships to Singapore or Vietnam to be completed. To some owners shipyards in Eastern Europe start to look interesting again for new buildings.
Over the next couple of years it will be interesting to see if China is able to maintain the growth in the ship building sector, or if it is going to price itself out of the market like we see in other sectors of industry. See the article ‘China’s boom too good to last’.