In an attempt to increase its profits in the coming years amid the ongoing trade dispute between China and the United States, Dalian Shipbuilding Industry Co Ltd announced this week its plans of shifting to building more high-valued vessels.
The subsidiary of the state-owned firm China Shipbuilding Industry Corp hopes to counteract the negative effects of the ongoing trade dispute with the new strategy.
According to company president Yang Zhizhong, the demand and income confidence in bulk vessels, container ships, and chemical tankers have declined. As the activity in the trade of goods and commodity continues to decline, ship owners and banks are now less likely to make investments in such vessels.
For this reason, Dalian Shipbuilding announced that it will be shifting its manufacturing facilities to build more profitable high-value vessels such as floating oil and gas production units, liquefied natural gas (LNG) carriers, large crude carriers, and storage and offloading (FPSO) vessels.
The company hopes to compete with countries such as South Korea in the building of LNG carriers.
Building these high-value vessels will require more advanced technologies when compared to traditional carriers. LNG carriers typically store gases at temperatures of -163 C, which will require special materials. LNG carriers typically cost anywhere from $200 million to $250 million per vessel.
To achieve this goal, Dalian Shipbuilding is planning to heavily invest in the development of new heavy industry technologies such as new material research and production techniques. Yang mentioned that China's shipbuilding supply chain is quite robust, with nearly 85 percent of ship parts and equipment such as propellers and diesel engines available from domestic manufacturers.
The deputy secretary-general of the Beijing-based China Association of the National Shipbuilding Industry, Tan Naifen, feels that Dalian Shibuilding's strategy will be beneficial to China as a whole. To ensure its energy security, China will need its own supply of LNG carriers and heavy transport vessels to increase its import of energy commodities from global suppliers such as Qatar and Russia.
As China's energy demand continues to grow, a rapid increase in the importation of energy commodities will become necessary. Drewry, an independent maritime research firm, estimates that China will be importing around 600 million tons to 100 million tons of LNG annually by 2022. To keep the supply up, China will need around 60 to 100 LNG carriers.
Apart from Dalian Shipbuilding, Chinese firm Hudong-Zhonghua Shipbuilding has also revealed plans to build the world's largest LNG carrier. The Shanghai-based shipbuilding unit of China State Shipbuilding Corp plans to build a vessel capable of carrying 270,000 cubic meters of LNG, which it hopes will help cope with China's rising demand.
