Shipping Lines Are Getting Worried About Dependence on China

In February, shipping giant Maersk took possession of a new cargo vessel, one that can meet the International Maritime Organization’s requirements for zero-emission shipping. That’s the good news. The bad news? The Maersk Biscayne was built by the Jiangsu New Yangzi shipyard in China, where Maersk has several more ships waiting to be built. Shipping companies are discovering that they’re far too dependent on Chinese shipyards, at a time when the rapid downward spiral of China’s relationship with the West could have calamitous effects. But Western countries’ atrophying shipyards will take a lot of time, and a lot of money, to restore to anything close to what’s needed.

China makes a lot of ships. According to the Chinese Ministry of Industry and Information Technology, last year Chinese shipyards built 47.3 percent of ships made around the world, received 55.2 percent of new orders, and had 49 percent of holding orders. That’s a radical shift from the early 1900s, when British shipyards produced almost 60 percent of merchant ships.

In the early 1950s, Britain and Western Europe still dominated shipbuilding for the global market. But since then, and especially since the 1980s, globalization has taken its predictable course. By 2010, only about 3 percent of all ships were made in the U.K. and Europe; after China, South Korea and Japan built the most. Today, the EU reports it accounts for 6 percent of civilian shipbuilding, while the United Nations Conference on Trade and Development reports that China, South Korea, and Japan together build 94 percent of the world’s civilian ships.

Until very recently, that was fine; indeed, it was desirable, because Chinese shipyards build (and repair) ships well and efficiently. Now, though, shipping companies are realizing that their dependence on Chinese ports may not be such a good bet after all. While they—like most other companies—don’t take a position on issues like the persecution of the Uyghurs, they’ve concluded that the risk of a war over Taiwan is increasing and that such a conflict could disrupt Chinese shipbuilding. Even though de-globalization is in full swing, any disruption to shipping companies’ ability to transport goods would pose serious problems to the shipping industry. To be sure, global commerce is beginning to de-globalize—but that simply means that more goods will travel between friendly countries, including distant ones, and fewer goods will travel between the West and China and the West and Russia.

That means shipping companies have to find alternative shipyards. But, said Cormac Mc Garry, a maritime analyst with Control Risks, “Since European shipbuilding pretty much collapsed years ago, I’m not sure if you could really regenerate shipbuilding industry in Europe. Germany still has shipyards, but it’s nowhere near the capacity of China.” U.S. shipyards today mostly carry out repairs, not construction. If even just a portion of construction orders currently going to China would instead be given to European or American companies, existing shipyards would have to massively expand their plants before being able to accept their first order.

And that’s just the hardware. A generation of workers who knew how to build ships has retired since the shipbuilding exodus east began. “Just look at what we’re trying to do with semiconductors, and that’s a high-skilled industry,” Mc Garry said. “Shipbuilding is a lot of blue-collar work. Would we even have those workers? My family home in Cork [the Irish port city] overlooks a port that used to be a shipyard. The infrastructure is still there. Could you find the thousands of people needed to go there and put a ship together? Employment in Ireland has been in high-skilled professions for so long. I’m not sure you can get these people’s children to go back into shipbuilding.”

To be sure, past generations’ blue-collar work has gradually been automated and as a result requires fewer, but more highly skilled, workers. But shipyards are massive plants that require significant investment before the first ship can be built. A shipyard being built by the Italian shipbuilder Fincantieri in Mexico will cost an estimated $150 million—and will only do repairs, remodeling, and maintenance.

There’s a more immediate alternative than trying to get the yards back. In the first instance, Mc Garry said, any shipbuilding leaving China is likely to move to South Korea or Japan, which already produce more than 45 percent of all ships. That, too, is part of the accelerating friendshoring trend, with both countries being strong U.S. allies and stable democracies. In the longer term, though, there will be a market for more shipbuilding in Europe and the United States, and indeed in other Western countries. The U.K. government has realized that state support will be crucial if this is to happen. Last year it announced it will invest nearly $5 billion to support British shipbuilding—which currently focuses on naval vessels rather than merchant ones—and create a task force to make sure future shipyard workers have the right skills.

There are other countries where rebuilding the industry might not just make sense but also have historical resonance. In the summer of 1980, workers at Poland’s Gdansk shipyard led by Lech Walesa defied the Communist regime and went on strike—and then defied expectations by getting the regime to back down and allow them to unionize. Moscow complained that the workers and their new union, Solidarnosc, had links to “subversive centers abroad,” but the workers persevered. In fact, as the 1980s went on they inspired other Poles to voice their unhappiness with the government. In 1987, Pope John Paul II visited the shipyard—officially known as the Lenin Shipyard—and celebrated Mass with the workers. As the decade reached its end, the Communist regime fell.

Globalization brought a great number of jobs and factories to Poland, but the Gdansk shipyard languished in the competition with Chinese rivals. Today it’s a shadow of its former self, though a Danish builder recently acquired it, thus staving off potential closure. The iconic site, in fact, seems well-positioned for a comeback. It would be poetic justice for Gdansk’s remaining dockworkers if their shipyard were to defy the rule of not just one authoritarian government—that of Communist Poland—but of a second, even more powerful one, too: that of Xi Jinping’s China.