Shipbuilding Industry, Shipbuilding Sector

By: EconomyWatch   Date: 30 June 2010

About The Author

EconomyWatch

The core Content Team our economy, industry, investing and personal finance reference articles.

EconomyWatch, Content Team

 

  • Dot Div
  •      

The shipbuilding industry is involved in the construction and modification of ships. This is carried out in a specialized facility called a shipyard. The industry builds ships for commercial as well as military purposes.

Shipbuilding Industry: History

The shipbuilding industry can be traced back to 2,500 BC, when ancient Egyptians assembled wooden planks to build ships. Greeks started using multiple masts for increasing the speed. The shipbuilding industry across the world progressed during the ‘Middle Ages.’ China was home to some of the biggest seaports of the world, including Quanzhou and Guangzhou.

During the nineteenth century, the use of iron in shipbuilding increased. In 1843, Isambard Brunel built the ‘Great Britain,’ the first ship made completely of iron. Steel replaced wrought iron in the latter part of the century due to its easy availability. However, the use of wood for building decks continues until today.


Shipbuilding Industry: Demand and Supply Drivers

The major demand drivers of the shipping industry are:

  • World GDP: High levels of economic activity boost the trade of raw materials. This requires more ships to be built.

  • Oil: High demand for oil creates the need for building tankers for transporting it.

  • Steel production: As steel constitutes approximately 42% of the world’s dry bulk trade, it directly influences the demand for building dry bulk ships.

The major supply drivers of the industry are:

  • Capacity: Shipbuilding is a time consuming process. Hence, the industry is largely unable to increase supply, following a sudden increase in demand.

  • Shipbuilding cost: Low prices may lead to increased orders, fueling supply in the market.

  • Economic life: A long fleet life implies low growth of the fleet, resulting in low supply levels.

  • Regulations: The regulations established by the International Maritime Organization determine supply.

Shipbuilding Industry: Major Players

The world shipbuilding industry is largely dominated by Asian players, such as South Korea, China and Japan. In 2008, South Korea’s production level was higher than that of the entire world combined. The nation’s top shipbuilding companies include Hyundai Heavy Industries, Daewoo Shipbuilding and Marine Engineering and Samsung Heavy Industries. The world's biggest shipyard (operated by Hyundai) launches a new vessel every four days.

The shipbuilding industry is worth $100 billion (Bloomberg report, December 2006). The industry is vital to the economy as it supports trade and other ancillary services.


  • Dot Div
  •      

Most Popular in Shipping and Shipbuilding

Related Links
blog comments powered by Disqus