(Yicai) April 11 -- Big Chinese shipbuilders have arranged production as far as four years in advance as the industry rings in a new boom cycle, according to insiders. 

Major shipyards have scheduled production till 2028 to meet orders, and small and medium-sized shipbuilders have done the same till 2027, industry sources said to Yicai in interviews.

The industry is still in the early stages of the upward cycle which will continue in the next three to five years, Zhou Jianxiang, deputy general manager of CSSC Chengxi Shipyard, said to Yicai. 

The demand for shipping capacity is rising as the global economy picks up, Zhou noted, adding that even though the current capacity of container ships is sufficient, there is great room for increases in oil tankers and dry bulk ships.

In the first two months of this year, domestic shipbuilders received 15.2 million deadweight tons of new orders, up 64 percent from a year ago, and export orders made up almost 91 percent of the total, per statistics from the China Association of the National Shipbuilding Industry. The number of orders on hand amounted to 149.2 million DWTs as of Feb. 29, up 31 percent from a year earlier, and export orders accounted for 92 percent of all.

Geopolitical Risks and Industry Concentration 

External factors have affected the cycle too. 

Capacity shortages have intensified because of geopolitical risks, as well as the drought that is limiting traffic through the Panama Canal, so ships are forced to take longer routes and this has prompted shipowners to invest more, Zhou said.

On the other hand, a large number of shipyards have gone bankrupt or been merged since 2008, causing a global decline in shipbuilding berths, and this is one of the reasons why existing shipyards have received booming orders, Chen Yang, editor-in-chief of shipping information provider Xinde Marine News, said to Yicai.

The global number of shipbuilding berths totaled 155 as of January, down by half from a peak of 321 in 2009, and most of them were located in China, Japan, and South Korea, according to Clarksons, a global provider of shipping services.

Upgrade Cycle 

Old ships are starting to require replacements.

Shipbuilders are expected to receive more orders as it is time to replace ships built early during the previous high cycle that lasted 11 years till 2011, SDIC Securities stated in a research report early this month.

The increasingly strict regulations on emissions have also urged shipowners to upgrade their ships, resulting in a large number of new orders on more environment-friendly ships with higher fuel efficiency, Chen noted.

Chinese shipyards have surpassed their South Korean peers in new orders for three straight years as the local shipbuilding capacity is rising, Zhou said, adding that the product mix is becoming more diversified. For example, domestic firms have scored orders for high-value vessels such as ultra-large cargo ships and liquefied natural gas carriers, and these used to be built by South Korean rivals before, the deputy GM added.

First Orders to Enter Delivery

The latest boom cycle started in 2021, partly because of the skyrocketing shipping rates during the Covid-19 pandemic. Orders placed around that time have matured to delivery since early this year.

From January to February, Chinese builders finished almost 8.3 million DWTs of new vessels, up more than 95 percent from a year ago, and most of them were made for export at nearly 93 percent, according to data from the CANSI. 

China exported 937 ships in the first two months, up 60 percent year-over-year. The value of the exported ships amounted to CNY48.3 billion (USD6.7 billion), almost tripling year-over-year, which contributed to a rebound in China’s exports of goods, returning to double-digit growth.

Editors: Tang Shihua, Emmi Laine