The oversupply of tankers is driven by mass production of standard products in China. Maybe encouraging the building of higher value vessels will dampen output.
It is rare for me to write a human interest story, but I was intrigued by the tale of the working life of newbuilding supervisor Peter Bertelsen. At the risk of breaking the third wall, this story was relayed to me by Maersk’s media people, who wanted to make the point that time and effort had been made in discerning the requirements of customers, and the LR2 tankers on order in China were being built to the highest standards.
The story ticked those boxes, but my real interest in the story is the implication for the future of shipbuilding in China, and how the transfer of technology could reduce vessel oversupply.
Decades ago, Peter Bertelsen would have been supervising the Maersk LR2 newbuildings in AP Moller-Maersk’s own Odense shipyard. With its immense financial resources, AP Moller-Maersk was able to carry on building bulk vessels at Odense long after other European owners had been seduced by lower prices in Asia.
The remaining European yards switched to higher value vessels such as cruise ships built in Germany, Finland and Italy and left the bulk vessels to Asia. China became the de facto location for ordering a standard bulk carrier or tanker.
China was able to do this due to the economies of scale and access to a cheap labour force. However, the boom in shipbuilding has led to an immense transfer of technology and experience from the tens if not hundreds of experienced newbuilding supervisors working on foreign-owned vessels in China.
As China switches up to more sophisticated vessels, there is less incentive to build bulk vessels such as tankers. Plus, a more sophisticated workforce insists on a higher standard of living. If this continues, Chinese shipbuilding may find itself in the same position as European shipbuilding in the 1990s.
Would this be a bad thing? Maybe not if managed properly, an orderly downturn in Chinese bulk vessel building capacity would go some way to reducing the oversupply in some sectors. After all, it is difficult to order speculatively if your favourite yard is eyeing LNG carriers instead of VLCCs.
The managing side will come in where the bulk vessels will be built. Another BRIC, such as India, is one solution. In which case, rather than withholding technology transfer, it should be encouraged to quickly bring the new mass builder of bulk ships as far up the ladder of vessel sophistication as quickly as possible.
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