SSY Japan Update : 13th October 2023

As the maritime community gathers in Imabari (within the Ehime Maritime Cluster) for this week’s maritime forum, a number of interesting topics were discussed. One of the highlights of the conference related to how to advance the Japanese shipping community in one of the most important maritime clusters in West Japan.

The Japanese shipbuilding market is regarded as one capable of constructing vessels with the highest quality that are built to last, however it has been gradually losing its global market share. If the current trend persists, yards could lose their importance over time. The current orderbook suggests that majority of the order backlog sits with the Chinese and Korean shipbuilders. Whilst the topic of energy transition has been more of a dilemma for everyone in the shipping community, it has been suggested that Japanese shipyards could perhaps use this as an opportunity to devote resources towards developing vessel designs that serve the final goal of decarbonizing shipping rather than meeting transitional goals.

Japanese yard prices are also on the higher side when put alongside their Chinese peers – a phenomenon that has always existed and has been justified by the superior quality of Japanese built vessels. However, it is noted that the cost of steel (a large cost component for vessel construction) for Japanese shipyards are at least 50% higher than that in China. This factor alone has eaten into the Japanese shipyard’s profitability even with the higher prices they are commanding in the market.

Suggestions were also made to take advantage of the weak Japanese yen where ship prices could be a blend of Japanese Yen and US Dollars for domestic owners. Such a blend could perhaps mimic the input costs – for instance, USD to procure overseas parts such as LNG fuel tanks, and JPY to take care of domestically procured items such as steel plates. However it is strongly debated by the builders that to take a position in a weak yen climate for a vessel that takes 2-3 years to construct is a risky business strategy for them to adopt.

Whilst there are many shipping decarbonization projects progressing in Europe, the initiatives being taken are still deemed as lacking in Japan, particularly in the Imabari area. It has been proposed that industry players undertake more green projects that can be developed and implemented in the Imabari society. This way it could generate more maritime-related stakeholders to gather around the area. Government support is also critical to pull off such an initiative to attract the right talent to flow into one of the largest maritime clusters in Japan.

By Eugene Quek, Partner & Head of Projects in Japan, SSY