Rapid economic growth in emerging countries such as China has led to a surge in global demand for ships that far exceeds current production capacity, the nikkei business daily reported. As a result, Japan's shipbuilding giants have expanded their production capacity after 30 years. The recovery marks a rapid return to export competitiveness of Japan's domestic manufacturing sector .
Japan's shipbuilding industry has slashed investment twice since the late 1970s and stuck to a no-new capacity "cap and trade" until 2003. Companies have responded to rising demand in recent years by maintaining existing capacity and increasing productivity, with 2006 shipping at the highest level since 1975. However, due to the high demand, orders have been placed in 3 or 4 years.
Ishikawa will reopen its aichi shipyard, which closed in 1996, start building bulk carriers carrying iron ore this year and invest an additional y3bn, with plans to build large offshore storage facilities and carriers for liquefied natural gas. Ishikawa's existing two shipyards, wushi and yokohama, and the aichi plant will have a total capacity of 1.1 million tons, an increase of about 10% . Mitsubishi heavy industries plans to invest y40bn over four years to add giant cranes to its Nagasaki and kobe shipyards, adding more than 10 per cent of its 1.56m tonnes of shipbuilding capacity in 2006. Its subsidiary, kawasaki shipbuilding, plans to invest about 10 billion yen over the next two years to build capacity for LNG ships.
In addition to surging demand, Japan's shipbuilding giants have been building capacity thanks to currency movements in recent years and improved production technology that has sharply narrowed the cost gap with south Korean rivals. In recent years, the appreciation of the won has significantly increased the labor cost of South Korea, while Japan has almost erased the production cost gap of about 30% higher than South Korea by virtue of the depreciation of the yen and the control of personnel and wages, greatly enhancing its competitiveness. (excerpted from Air China trade website)