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Amid growing concerns over a “new order cliff” as global shipbuilding orders have halved this year, positive demand factors such as the replacement of aging vessels still remain. However, with the global economic slowdown and ongoing uncertainties, many expect a cautious stance to persist, leading to continued weakness in the second half of the year.

Yang Jong-seo, a researcher at the Export-Import Bank of Korea’s Overseas Economic Research Institute, explained, “While new ship orders in the first half of the year did not fall to a severe slump level, they showed somewhat sluggish performance, dipping below actual construction volumes for the first time since 2021.”

Shipowners Lean Toward Caution Rather Than Investment

According to Yang, the International Maritime Organization’s (IMO) mid-term measures expected to be enforced from 2027 have raised the urgency to replace aging vessels that would otherwise face heavy penalties. This has led to unseen competition among shipowners to secure production slots at shipyards, maintaining relatively high demand expectations in the newbuilding market.

However, the emergence of U.S. protectionist policies, including tariffs under the new Trump administration early this year, has heightened global economic uncertainty and triggered an economic slowdown. This has significantly impacted the shipping and shipbuilding industries, causing a sharp drop in new ship orders—arguably the most critical factor behind the current downturn.

Given the bleak outlook for improvement in the second half, psychologically unsettled shipowners are expected to adopt a more cautious approach, favoring observation over aggressive investment.

Strategies Needed for Korean Shipbuilding

Some voices warn that a combination of factors—demand collapse, oversupply, labor shortages, and geopolitical risks—could undermine the high-value strategies of major domestic shipbuilders. Notably, China’s “dock expansion → low-price orders → market share growth” strategy has already become a structural risk.

Recently, expectations have grown that the newly intensified shipbuilding cooperation between South Korea and the U.S. will provide fresh momentum for the domestic industry’s resurgence.

Nonetheless, Yang notes, “U.S. sanctions on China’s shipping and shipbuilding sectors are likely to lead to higher freight rates on U.S. routes and increased logistics costs, making it difficult to expect these measures to be short-lived.”

The domestic shipbuilding industry views America’s pressure on China as a somewhat fortunate opportunity to buy time. During this window, it needs to focus efforts on widening the quality gap with China and enhancing competitiveness.

Yang further emphasized, “Now that our shipbuilding sector is returning to profitability and regaining investment capacity, it is necessary to consider strategies that overcome price competitiveness disadvantages by expanding the quality gap with China through technology development and quality improvement.”

Written by Jeff Kim
[email protected]

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The article was provided by ASIASIS.

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