Kawasaki Heavy Industries will step up commercial shipbuilding in China and scale down production in Japan to improve cost competitiveness as the market rebounds from a yearslong slump.
The Japanese company plans a 50% capacity boost at a shipyard in Dalian, Liaoning Province, that builds mainly large ships, including tankers and bulk carriers. The facility is jointly operated with China Ocean Shipping (Group) Co., also known as Cosco. More than 20 billion yen ($176 million) will be invested at the site, including construction of a second dock about 550 meters long.
Large cranes, steel-processing facilities, assembly space for blocks -- the key component in shipbuilding -- and painting facilities will also be added in increments, with completion expected in the second half of fiscal 2018. The joint venture, created in 2007, initially sought to open two docks. But a lackluster market put construction of the second dock on hold. Now, with demand for large commercial ships looking likely to rise further, the operators decided it was time to give the green light to the second dock.
Prices of large commercial ships are on the rise worldwide and Chinese and South Korean groups are stepping up production in response.
In Japan, Kawasaki Heavy will close one of two docks at its mainstay shipyard in Kagawa Prefecture. It will instead install a train car production line there around 2019, reassigning some of the shipbuilding employees. The company plans to reduce its shipbuilding staff in Japan by around 20% through reassignment, attrition and other means.
With the shift, the company will build about 70% of its commercial ships in China.
Kawasaki Heavy has another shipyard with Cosco, in Nantong, Jiangsu Province. Established in 1995, the site builds automobile-hauling midsize ships that require advanced technologies. The Nantong site will handle basic design and procurement for both Chinese locations to eliminate overlap and reduce costs.
For the current year ending in March, Kawasaki Heavy's ship and offshore structure segment is expected to sustain a 5 billion yen operating loss, its third straight annual loss. Should the shift to China go smoothly, the segment should start generating a profit in fiscal 2018.
In the January-September period, South Korean shipbuilders held 45.9% of commercial ship orders, according to research company IHS. Chinese companies had a 23.7% share with only 7% of the market controlled by Japanese groups.
Many Japanese shipbuilders have kept their operations mainly in Japan, where high labor and materials costs have hurt their ability to compete on price. China offers not only relatively cheap labor but also more spacious shipyards that allow for optimal layouts based on workflow and dock location, all of which help improve cost competitiveness.
Source: Nikkei Asian ReviewPrevious Next