SHIPBUILDING MARKET ANALYSIS

Market Challenges And Opportunities

Global Shipbuilding Market Drivers:

• Rise in Trade-related Agreements: The global shipbuilding market is experiencing growth due to a surge in trade agreements between developed and developing countries. These agreements facilitate the transportation of goods, leading to a preference shift among suppliers towards more efficient waterway transportation. This shift has prompted cargo vessel manufacturers to innovate and produce more efficient container carriers of varying sizes and capacities, thereby driving the global market growth. Moreover, the implementation of free trade agreements has led to a decrease in duties and taxes, stimulating an increase in trade activities. As a result, exporters and importers are exempt from paying certain taxes to the government. Trade bloc countries are also easing restrictions and enhancing trade flexibility. Consequently, an increase in trade agreements has led to a higher demand for robust containers, further bolstering the global shipbuilding market growth.
• Advances in Shipbuilding Techniques and Materials: Shipyards are increasingly using prefabricated modules that can be assembled into larger ship sections or whole ships. This allows for construction efficiencies, higher quality, and reduced costs and build times. Major shipbuilders like Hyundai Heavy Industries have invested heavily in modular construction capabilities. According to a 2021 report by the United Nations Conference on Trade and Development (UNCTAD), modular construction has reduced shipbuilding time by 15-30% The use of lighter, stronger materials like composites and aluminum alloys enable lighter ship designs, reducing fuel consumption and emissions. High-strength steel and aluminum alloys have replaced heavy steel in some ship types. Composites and nano-enhanced materials are also seeing increased usage. In 2021, The American Bureau of Shipping estimates that composites now comprise 5-10% of a new commercial ship's structural weight compared to almost zero just a decade ago.

Global Shipbuilding Market Opportunities:

• Increasing R&D and Demand for LNG-Fueled Vessels: The global shipbuilding industry stands to benefit tremendously from recent advances in materials and construction techniques. One area of innovation is the increased use of alternative fuels and energy systems on ships. The demand for eco-friendly ships, driven by stricter emissions regulations, opens avenues for building hybrid, LNG-powered, and fully electric ships.
• Moreover, many market players are offering, product launches , collaborating, and signing agreements to enhance their market position
• For instance, on January 28, 2023, the second-largest shipbuilder in Japan, Japan Marine United, commenced the development of ships that run on liquefied natural gas (LNG). These LNG-powered vessels are known to curtail carbon dioxide emissions by approximately 25% when contrasted with heavy fuel oil. Projections indicate that there will be over 2,000 LNG-fueled ships in operation globally by 2030.
• Military Demand and Technology Innovation: The shipbuilding industry is experiencing a significant upswing in opportunities, primarily attributable to the proliferation of military missions and operations. This is underscored by a confluence of factors, notably the rapid technological advancements in shipbuilding. Key elements driving this surge include the strategic integration of big data for maintenance, the utilization of drones, and the development of autonomous ships, all of which have a profound impact on the industry's growth and prospects.
• Moreover, the development of autonomous ships represents a groundbreaking advancement. These vessels have the potential to revolutionize the industry by reducing operational costs, enhancing safety, and addressing workforce shortages. As a result, shipbuilders investing in autonomous ship technology stand to gain a competitive edge in a rapidly evolving market.
• For instance, on July 27, 2023, Goa Shipyard Limited (GSL) and BITS Pilani – Goa have collaboratively aligned with the Ministry of Defence's strategic focus on integrating artificial intelligence (AI) into military applications. Their partnership aims to harness AI technologies for the construction of warships and the development of military equipment.

Global Shipbuilding Market Restraints:

• Environmental regulations: Stringent environmental regulations present a notable challenge for the shipbuilding industry, demanding costly alterations in design and technology to adhere to emissions and efficiency standards. To navigate this restraint effectively, shipbuilders must commit to investing in eco-friendly innovations and research and development efforts. This includes the development of cleaner propulsion systems, advanced hull designs, and more efficient operational practices. Simultaneously, governments can play a pivotal role by supporting research initiatives and providing incentives, such as tax breaks or grants, to facilitate the industry's transition towards greener, more sustainable shipbuilding practices. This collaborative approach helps ensure compliance with regulations while fostering environmental stewardship within the industry.
• Overcapacity and Competition: Overcapacity in the shipbuilding market is a substantial challenge, driven by an excess of shipyards and manufacturers. This surplus of industry players leads to fierce competition, often resulting in a downward pressure on prices and profit margins. Shipbuilders grapple with the struggle to secure orders and maintain profitability amid this intense rivalry. To address this restraint, consolidation and strategic alliances between shipbuilding companies can be a viable solution. By merging or forming partnerships, shipbuilders can streamline their operations, reduce redundancy, and collectively tackle overcapacity. Such collaborations enhance their competitiveness, enabling them to weather the challenges of a crowded market and ultimately thrive in the industry.