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Russell Barling

A change in industry practice is needed for the world's largest shipyard to thrive

China State Shipbuilding Corp's  (CSSC) plan to build the world's largest shipyard in Shanghai lacks little in ambition but matching established North Asian rivals' productivity and technical expertise demands major changes in industry practice.

The firm yesterday confirmed  reports it planned to build an  8km long waterfront facility on Changxing Island, in the Yangtze River, off the eastern side of Shanghai. The project is slated to cost 20 billion yuan (HK$18.85 billion) to 30 billion yuan and take up to 10 years to build.

A Hong Kong-based industry expert said the project was ambitious given the upgrading needed in the mainland industry.

'That is a lot of facilities to get up and running in such a short time,' said Matthew Flynn, a maritime consultant and author of China Shipbuilding: The Emerging Giant, a 200-page report for New York-based Poten and Partners.

'Actual production is a lot more than just building dry docks,' Mr Flynn said. 'It'll take a lot to get those operations at high enough efficiency to match what the South Koreans are producing at their larger facilities.'

By 2015, Shanghai's four shipbuilding yards will be designed to have an annual capacity of 12 million deadweight tonnes, almost four times China's present output, making Shanghai the busiest shipbuilding location in the world, a CSSC official said.

Chinese yards are presently taking 12 to 14 months to produce container vessels in the 5,500-teu (20-foot equivalent units) capacity range. In contrast, their counterparts in Japan and Korea produce a similar vessel in seven to eight months.

China also faces a dearth of skilled labour for the industry. Qualified welders, for example, take more than a year to train and their loyalties are tested when more lucrative construction jobs become available.

Maritime electricians take three years to train and are just as easily lured away.

CSSC welcomed foreign and private capital to invest in the project, the spokesman said, but declined to give further details of the financing.

Recent trends  appear to indicate the project would have to heavily rely on domestic funds. Shanghai Waigaoqiao Shipyard, which spent 3.2 billion yuan erecting two large dry docks in the late 1990s, sought foreign financing in Japan but ultimately had to rely on mainland banks.

One of the four existing yards, Jiangnan Shipyard, will be shut down and moved to the new site.

Shanghai Shipyard, another of the quartet, is also in the process of moving.

Both are  on the banks of the Huangpu River, a tributary of the Yangtze which flows through China's commercial capital.

The city government has chosen  Jiangnan's present location to host the World Expo in 2010.

CSSC started to export ships at the end of the 1970s and in 1982 accounted for 0.8 per cent of global output, ranking 17th. Last year, that figure had risen to 8.3 per cent, in third place worldwide for the eighth year in succession.



CSSC project confirmed