by Lloyd's List
20 March 2025 (Lloyd's List) - PLANS by the US government to introduce a levy of up to $1.5m on any port calls by Chinese-built ships is unlikely to curb China’s shipbuilding might, believes Bureau Veritas’ Asia Pacific senior vice-president Alex Gregg-Smith.
He said that while the potential discriminatory fees on ship calls by vessels built in China might create opportunities for shipbuilders elsewhere, there will be limited potential for shipowners to get the ships they need at the right price or quality by switching from Chinese shipyards.
“The reaction to the United States Trade Representative proposals in China was muted — the big Chinese shipyards are not concerned. They have full orderbooks until at least 2028 and there are big expansion plans by local owners with heavy ordering to come,” Gregg-Smith told Lloyd’s List.
“I don’t think USTR plans will have any great effect on Chinese shipbuilding,” he added.
Some international shipowners may now be looking to place orders at the world’s number two shipbuilding nation South Korea to avoid the risk of the USTR levy.
But Gregg-Smith noted that while South Korea’s major shipbuilders may have an opportunity to pick up new orders, at the expense of Chinese shipbuilders, any switch might not be simple.
South Korean shipbuilders remain focused on higher-value tonnage in the containership and gas carrier sectors and have little spare capacity as they focus on growing profit margins. As such they are unlikely to be willing to pick up orders for low value bulk carriers or low margin crude oil tankers which are a staple of Chinese shipbuilders.
He also believes that the US government’s desire for American shipbuilding to be globally relevant faces numerous hurdles, including high cost and lack of relevant US skilled labour.
Gregg-Smith argues that the Jones Act, which compels most ships trading in intra-US trades to be built at local shipyards, was a significant factor in the downturn of American shipbuilding by driving up costs.
US merchant shipbuilding contract prices are between five and six times higher than China yard pricing.
“The Jones Act, which has been in place since the 1920s, has hardly helped US shipbuilding to be competitive. But greater investment in American shipbuilding should be welcomed though I’m sceptical of the US becoming a major shipbuilding player again,” said Gregg-Smith.
Labour shortages are likely to be a key precluding factor in making American shipbuilding great again.
“There is one big problem which is industry wide and that’s a shortage of skilled labour. In South Korea and Japan there is continuing difficulty in recruiting workers for heavy industrial sectors,” noted Gregg-Smith, while adding that labour shortages are increasingly becoming a problem in China too.
He said that shipyard manning in the US will also face difficulties in recruiting any workers for its hoped for shipbuilding renaissance.
Should the USTR levy come into force Gregg-Smith says he doesn’t expect to see a rush of shipowners cancelling their existing orders at Chinese shipyards.
“I’ve been speaking to various shipowners in Asia and elsewhere about the levy and they all seem fairly relaxed about it. Some say it might affect where they trade their new ships,” said Gregg-Smith.
He noted that despite shipbuilders having full orderbooks up to at least 2028 there are numerous new orders expected to be placed this year amongst various vessel sectors.
These include high value liquefied petroleum gas carriers and containerships. Significantly, most of the orders in the pipeline are being lined up with Chinese shipbuilders.
Third largest shipbuilding nation Japan is unlikely to be able to cover any additional business since its (much reduced in the past decade) capacity is tied up with orders for domestic shipowners.
The Japanese government also has no desire to expand capacity, and potentially return to its 1970s and 1980s glory days, when Japan was the world’s leading shipbuilding nation.
Gregg-Smith said that Japanese shipyards continue to face personnel challenges, which are worse than for South Korean yards.
“From engineers and designers to blue collar shipyard workers, Japanese yards are struggling to fill vacancies. The industry in Japan is also quite conservative and has high wage costs,” noted Gregg-Smith.
Japanese shipyards are also very risk averse and will refuse to build ships to shipowner’s own designs, instead only building standard shipyard designs with any changes to specification rarely permitted.
Conversely, many Chinese shipyards remain willing to build bespoke, shipowner-led, designs despite the extended production times that this would entail.
Meanwhile, the Indian government is formalising its own strategy to become a global shipbuilding player, utilising South Korean shipbuilding expertise to help it get there.
“India has all the elements to become a big shipbuilding nation. These include a strong steel industry, engineering expertise and low labour costs,” said Gregg-Smith.
However, previous attempts to become a global player failed as India was unable to scale up its shipyards.
Already large shipyard orderbooks are continuing to strain shipbuilding supply chains with delays to main engine deliveries and dual-fuel injection systems said to be causing delays to production at major shipbuilders.
Gregg-Smith says a key factor in solving the personnel crisis in shipbuilding, and improving shipbuilding production times, is to attract more young people into the industry.
“The latest shipbuilding super cycle has seen a boom in orders but has created a pinch point for the human resources side,” he said.
BV itself, which is providing class services for 1,900 newbuildings worldwide, is working with the industry to promote the sector to new talent via internship schemes. The class society is also working with several Chinese universities which are providing assistance for research studies into new maritime technologies.
“The industry needs to train for new technologies and regulations. Shipbuilding remains a “handcraft” business which can’t be easily replaced by Artificial Intelligence,” said Gregg-Smith.
Before the US looks to impose discriminatory tariffs in a ‘quick-fix’ attempt to boost its previously forgotten shipbuilding sector, perhaps it should first focus its efforts on the all-important human resource factor.
As Gregg-Smith alludes to, shipbuilding is a highly complex industry that is heavily dependent on access to a ready and skilled workforce. That requires long-term planning and effort rather than short-term political manoeuvring.
