China Now Controls 70% of Shipbuilding: Can the U.S. Make a Comeback?
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Quick Read
Summary
Takeaways
- ❖China's share of the global shipbuilding order book has surged from 5% in 1990 to over 70% today, largely at the expense of Europe, Japan, and Korea.
- ❖The US was a shipbuilding leader during the World Wars but consciously decided to offshore commercial shipbuilding post-WWII, focusing on naval construction.
- ❖Key requirements for a successful shipbuilding nation include domestic supply chains, skilled labor, robust financing, design expertise, and the capacity to absorb significant financial losses.
- ❖The US currently lacks critical elements like a domestic supply chain for components (e.g., propellers), abundant cheap labor, and a strong commercial design base.
- ❖The host argues that the US's national security strategy recognizes the need for industrial base strength, but a long-term commitment and potentially new technologies like AI/robotics are needed for a shipbuilding comeback.
Insights
1China's Unprecedented Shipbuilding Dominance
China currently controls over 70% of the global shipbuilding order book, a staggering increase from its 5% market share in 1990. This dominance has grown significantly, with China's share of annual deliveries projected to be 60% by the end of 2025, compared to 17% for Japan and 14% for Korea. The sheer scale of China's production is evident, with its order book growing from 122.4 million deadweight tons in 2022 to 333 million, and the number of ships ordered more than doubling from 2,170 to 4,055.
According to the latest BRS report, China now controls over 70% of the global order book. By the end of 2025, it held a 60% share of annual deliveries compared to 17% for Japan, 14% for Korea. China's market share in the order book for commercial shipping has gone from 51% in 2022 to 70.9% (333 million deadweight tons of cargo up from 122.4, and doubled the number of ships from 2,170 to 4,055).
2US Shipbuilding Decline: A Conscious Policy Choice, Not Chinese Fault
The US's decline in commercial shipbuilding was not caused by China's emergence but was a deliberate policy decision made in the 1980s to offshore commercial shipbuilding. The US ended operational and construction differentials (subsidies) for international trade ships, choosing to focus on naval shipbuilding and relying on allies like Europe, Japan, and Korea for commercial vessels. This strategic shift meant the US 'got its eye off the ball' regarding commercial shipping, a recurring issue throughout its history.
In this respect, it is fair to say that China had no responsibility for the decline of the US ship building industry. The US made a conscious decision to offshore its commercial ship building. It ended what were known as operational and construction differentials. The US really got its eye off the ball. And I would argue the US eye on the ball on shipping has always been a problem. It never maintains it.
3Critical Success Factors for a Shipbuilding Nation
Becoming and remaining a shipbuilding powerhouse requires several key conditions: significant investment, a short supply chain with domestic manufacturing of components, skilled personnel (from labor to management), a solid financial system that supports customers, strong design expertise, and the ability to accept and cope with large, long-term losses. China, Japan, and Korea excel in these areas, particularly in mass production and integrated supply chains, while the US struggles with high labor costs, a fragmented supply chain, and a lack of commercial design expertise.
Conditions for success include investment in the ship building industry to meet tougher quality standards, a short supply chain characterized by the domestic manufacturing of most components, skilled personnel from manpower to management, a solid finance system that supports its customers, strong design expertise, and an ability to accept and cope with large losses.
Bottom Line
The US's reliance on AI and robotics for future manufacturing productivity, as outlined in its national security strategy, could be a 'game-changer' for its shipbuilding industry, potentially offsetting high labor costs and lack of abundant cheap labor within a decade.
If successful, this technological leap could enable the US to re-industrialize shipbuilding without competing directly on labor costs, fundamentally altering the competitive landscape and addressing a major current disadvantage.
Investing heavily in R&D and implementation of advanced robotics and AI specifically tailored for large-scale, complex manufacturing like shipbuilding could create a new competitive edge for US industry, attracting talent and capital to a revitalized sector.
The host suggests that a 'broken' industry like US shipbuilding might be uniquely positioned for a 'reset' through disruptive innovation, similar to how Elon Musk transformed space exploration.
This implies that incremental improvements or traditional approaches may be insufficient. A radical, technology-driven overhaul, potentially led by a visionary figure, could be more effective than attempting to replicate the existing models of dominant shipbuilding nations.
Identifying and empowering 'Elon Musk-type' innovators within the US maritime or manufacturing sectors, providing them with significant capital and regulatory flexibility, could accelerate the development of next-generation shipbuilding processes and technologies.
Lessons
- Develop a comprehensive, multi-decade national strategy for commercial shipbuilding that integrates both naval and merchant marine needs, moving beyond a sole focus on military vessels.
- Invest significantly in domestic supply chains for shipbuilding components, reducing reliance on overseas manufacturing for critical parts like propellers and engines.
- Foster a new generation of skilled labor and management in commercial naval architecture and marine engineering through educational programs and apprenticeships, addressing the current shortage of expertise.
- Establish a robust financial system, potentially with government backstops or incentives, to support long-term investments in shipbuilding and help companies absorb the inherent cyclical losses of the industry.
Rebuilding a National Shipbuilding Industry
**Secure Long-Term National Commitment:** Enact legislation and policy that designates shipbuilding as a critical national industry, ensuring consistent government support and investment over several decades, regardless of political cycles.
**Re-establish Domestic Supply Chains:** Implement incentives and direct investments to localize the manufacturing of essential shipbuilding components (e.g., steel, engines, propellers), reducing reliance on foreign suppliers and ensuring supply chain resilience.
**Develop Skilled Workforce & Design Expertise:** Fund and expand educational programs (e.g., naval architecture, marine engineering, vocational training) to cultivate a new generation of skilled labor, engineers, and designers focused on commercial vessel construction.
**Create a Supportive Financial Ecosystem:** Design financial mechanisms, including government-backed loans, subsidies, and risk-sharing programs, to attract private capital to shipbuilding projects and help shipyards manage the industry's inherent volatility and long investment cycles.
**Embrace Technological Disruption:** Invest in R&D for advanced manufacturing technologies like AI, robotics, and automation specifically for shipbuilding, aiming to create a competitive advantage that offsets high labor costs and improves efficiency and quality.
Notable Moments
US decision to offshore commercial shipbuilding in the 1980s by ending operational and construction differentials (subsidies).
This policy shift marked a conscious pivot away from commercial maritime power, leading to the current dependence on foreign shipbuilders and contributing to the decline of the domestic commercial shipbuilding industry.
The BRS report's assessment that the Jones Act has 'failed to produce' a strong US shipbuilding industry, which the host strongly disputes.
This highlights a fundamental disagreement on the purpose and impact of the Jones Act, suggesting that critics misinterpret its intent as a cabotage law rather than a comprehensive shipbuilding stimulant, and that other factors like a lack of a 1950 Merchant Marine Act were more significant.
Quotes
"Shipping is a fascinating world. It is widely misunderstood and sometimes vilified... The industry is a corollary of its own success in connecting nations and transporting about 90% of internationally traded goods and the abovementioned criticism is somewhat unfair as it is by far the mode of transportation that consumes the least fuel and is the least polluting per ton mile."
"It is fair to say that China had no responsibility for the decline of the US ship building industry. And I would argue that the US was really not looking at really being a major commercial ship builder. It was very much focused on naval ship building."
"The Jones Act is outdated in a global economy and enriches a very special interest at the expense of every consumer in America. Repealing this restrictive and counterproductive law is vital."
"The US must never be dependent on any outside power for core components from raw materials to parts to finished products necessary to the nation's defense or economy. We must resecure our own independent reliable access to the goods we need to defend ourselves and preserve our way of life."
Q&A
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