Japan's shipbuilders see third straight year of decline in 2023

Despite a 36.5% on-month jump in orders in December, Japan's major shipbuilders still ended 2023 with another on-year decline in total orders at 272 vessels, equivalent to 11,994,917 gross tons (GT), new statistics released by the Japan Ship Exporters' Association (JSEA) show. This compares with total orders of 294 vessels in 2022 (equivalent to 13,204,400 Gt) and 326 ships in 2021 (equivalent to 15,562,500 GT), Mysteel Global notes.

The on-year decline came as no surprise because monthly orders had been fluctuating wildly throughout the year as the Japanese yards grappled with stiff competition from competitors in South Korea and China.

The JSEA quotes data from S&P Global Market Intelligence as showing that last year, Japan ranked a distant third in terms of total ship orders received, with South Korea winning orders equivalent to 16.9 million GT - down from 23.2 million GT in 2022- and China a whopping 53.5 million GT, up from 34.5 million GT the year before.

Meanwhile, at the end of last month the Japanese builders were holding ship export orders totalling 590 ships in 27.09 million GT, the JSEA statistics show, sufficient to keep the yards working for nearly three years.

For the year ahead, the pace and content of new orders could be influenced by events in the Middle East, a JSEA official explained, pointing out that demand for containers has increased for now because of the 'Red Sea issue' and the Houthi rebel attacks on shipping.

"More than 80% of vessels that previously went through the Red Sea are now taking a roundabout route via the Cape of Good Hope, which means their journey is taking a week or 10 days longer," he said. "This means that containers don't return on schedule to be loaded, so depending on how long it takes for the (Houthi) issue to be calmed, container vessels are in short supply for now."

Nevertheless, the biggest challenge for the Japanese yards remains building costs including those of crucial inputs such as steel. For ship plate, the Japanese integrated mills are apparently planning to add another Yen 20,000/tonne ($136/t) for the current quarter, which will take the average prices to around Yen 140,000/t. "This is much more than the Chinese shipbuilders are paying to secure their local materials (so) there's no way to compete," the JSEA official said.

According to the most recent Japan Iron & Steel Federation (JISF) statistics for November, orders placed for ordinary steel for the shipbuilding and marine equipment sector reached 228,000 tonnes that month, lower by 5.8% from October but higher by 2.6% from November 2022.

Note: This article has been written in accordance with an article exchange agreement between MySteel Global and BigMint.