A golden opportunity to regain shipbuilding dominance

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A golden opportunity to regain shipbuilding dominance

Published: 24 Mar. 2025, 00:04 Updated: 26 Mar. 2025, 20:41

Audio report: written by reporters, read by AI

Kim Doo-sik

The author, an attorney, is the executive director of Tech & Trade Institute.

As China tightens its grip on global shipbuilding, a new front in the U.S.-China rivalry is emerging at sea. The timing aligns with a surge in global freight demand, creating favorable conditions for Korea to reclaim its status as a shipbuilding powerhouse.

Though overshadowed by semiconductors and automobiles in GDP and export figures, shipbuilding is a strategic industry that underpins both economic and military security. The Trump administration threatened heavy tariffs on Korean cars and chips but actively sought shipbuilding cooperation — underscoring the sector’s strategic significance.

Korea, once the world leader in shipbuilding, has lost ground to China in recent years. Korea’s market share, which averaged over 30 percent, began to drop sharply after 2018. Last year, China secured 71 percent of global ship orders while Korea captured just 16.7 percent.

The new 8,200-ton Jeongjo the Great destroyer, equipped with the latest Aegis combat system, docks at a naval base on the southern resort island of Jeju on Feb. 1. [YONHAP]

China’s rapid rise was propelled by long-term industrial policy and massive state support. A mere 5 percent in 1999, China’s market share surpassed 50 percent in 2023. It now holds 62 percent of the global order book, compared to Korea’s 21.4 percent and Japan’s 8.8 percent.

Yet Korea remains the only real alternative to counter China’s dominance. In the past, Korean shipbuilders faced accusations of dumping and were taken to the WTO by the European Union. But today, geopolitical shifts are changing the landscape. The United States, lacking shipbuilding capacity — just 0.2 percent of global output — now views Korea as an indispensable partner.

China’s shipbuilding capacity outpaces that of the United States by a factor of 233. It operates about 20 major yards and 50 docks, turning out commercial and military vessels at scale. The United States, facing this structural disadvantage, is expected to sustain its shipbuilding rivalry with China over the long term — a dynamic that benefits Korean firms.

Crucially, the United States is moving to open its naval shipbuilding and maintenance market to foreign firms. Two bills introduced in February — the Ensuring Naval Readiness Act and the Ensuring Coast Guard Readiness Act — aim to relax longstanding restrictions that barred foreign participation. If passed, they could open the door for Korean firms to join a 30-year U.S. naval expansion and a maintenance market worth more than $6 billion annually.

At the same time, the United States is preparing sanctions targeting China’s shipbuilding and maritime sectors. Proposed measures include port fees of up to $1.5 million for Chinese-built vessels and $1 million for ships owned by Chinese carriers. These could extend to third-country operators using Chinese shipyards or vessels delivered within 24 months.

Some global shipping firms are already shifting away from China. The Wall Street Journal reported that French shipping giant CMA CGM plans to invest $20 billion in U.S.-flagged ships and ports over the next decade, aligning with Washington’s policy direction. As a result, Korean shipbuilders are expected to win orders for 20 new vessels — a notable shift, as CMA CGM had previously placed most of its orders with Chinese yards.

Still, this opportunity must not breed complacency. If Korea fails to build long-term competitiveness, it risks ceding leadership to China once and for all. Now is the time to address structural issues and expand core capabilities.

At the heart of competitiveness is shipbuilding capacity. Korean yards are already operating at full capacity and cannot accept additional orders. During past downturns, firms reduced their facilities and workforces, focusing on high-value liquid natural gas, liquid petroleum gas and environmentally friendly ships. While this made economic sense, it widened the capacity gap with China.

China, by contrast, expanded its facilities even during downturns. According to market intelligence firm Clarkson Research Service, China’s production capacity will rise from 23.2 million compensated gross tonnage (CGT) in 2024 to 29 million CGT by 2030 — a 45 percent increase from 2020. Korea’s capacity, in comparison, will grow by just 6 percent.

If this trend continues, Korea’s production base will shrink in relative terms as Japan’s once did. Downsizing facilities inevitably weakens competitiveness, making it impossible to meet demand even when orders are strong. Korean firms must act now to prevent a repeat of this trajectory.

Given the volatility of the shipbuilding industry, companies cannot be expected to shoulder this burden alone. The government must provide proactive support, particularly during downturns, to help firms maintain capacity and invest in growth. Today, no major partner would object to such support.

A view of HD Hyundai Heavy Industries' Ulsan shipyard [HD HYUNDAI]

Korea should also expand its overseas production bases and establish a global manufacturing network. Leveraging its world-class shipbuilding clusters, skilled labor, and advanced technology, Korea can extend its “shipbuilding territory” and realize economies of scale through global production.

Financing and guarantees are another crucial factor. China prioritizes ship financing, leasing, and guarantees to support its industry. Korea must significantly boost financing options and expand refund guarantees to help shipyards secure orders with confidence. Moreover, the playing field must be level: China is not bound by Organisation for Economic Cooperation and Development export credit rules, giving it an unfair advantage.

Translated using generative AI and edited by Korea JoongAng Daily staff.