The Nihon Keizai Shimbun said on September 8 that Japan's number 2 shipbuilding firm, Kawasaki Shipbuilding Corporation (KSC), a subsidiary of Kawasaki Heavy Industries (KHI), will begin to construct liquefied natural gas (LNG) ships in China in 2018. The shipbuilder apparently intends to catch up with Korean competitors by reducing production costs, since they win most of the LNG carrier contracts in the world.
According to the news report, KHI is planning to create a system in a bid to annually produce two LNG tankers by 2018 with an investment of billions of yen in the Nantong Cosco KHI Ship Engineering Co Ltd (NACKS) shipyard located in Jiangsu Province, China. The NACKS shipyard was built by a joint venture between Kawasaki and China's largest shipping company China Ocean Shipping Group Company (COSCO), with equal investment in the business.
The Japanese shipbuilder plans to build LNG carriers in China with cheaper labors, thereby cutting 20% of total production costs. With reduced production costs, the company hopes to increase both profitability and the number of overseas orders obtained, for which it lags far behind Korean firms.
KHI announced that if it obtains more contracts through such cost-cutting measures, the company will construct LNG ships in another joint venture shipyard in Shenyang Province, China. Currently, Japanese shipbuilding companies construct all the LNG carriers in their country.
According to a British market research organization, 103 LNG ships are on backorder as of August 31. With the exponential growth in demand for LNG carriers, shipyards worldwide are expected to obtain orders for 300 LNG ships worth US$59.93 billion (65 trillion won, 6 trillion yen) by 2030.
In the global LNG shipbuilding market, the Korean shipbuilding companies occupy nearly 80% of market share. In contrast, Japanese firms have a market share of only 10%.