The efforts to establish a cruise shipbuilding sector in China take shape. Marintec will be the stage for the first-ever Chinese built cruiser. European players fluctuate between worrying and embracing the potential of the market
Marintec China 2017 dedicates a special area of the trade sh[ds_preview]ow to the cruise sector. »Marintec Innovation – Cruise Shipbuilding« features the construction, design and fitting-out of luxury cruise ships. The highlight of the exhibition is the first China-built luxury cruise ship. In June 2017 China State Shipbuilding Corporation (CSSC) announced that it will build the vessel which is expected to be operational in 2023. CSSC will collaborate with Italian shipbuilding company Fincantieri, US cruise company Carnival and classification society Lloyd’s Register in this project. The ship will be 323.6m long and 37.2m wide and will accommodate 4,980 passengers. A second is to follow and there are options for four more vessels.
In 2014, CSSC and Fincantieri had announced their cooperation which caused a stir in the European shipbuilding community which relies mainly on cruise vessel construction. The move is some sort of an assurance strategy for Fincantieri for the future – to be already involved in the Chinese market when it takes off and gain partners before they become competitors. And China vigorously wants to join the ranks of high-tech and luxury cruise-shipbuilders. The government has prioritized cruise shipbuilding as a key business sector in its economy and innovation programme »Made in China 2025«. This means subsidies and other financial incentives require Chinese-built products and content. The general goal for the Chinese economy is to raise domestic content of core components and materials to 40% by 2020 and 70% by 2025. Shipbuilders in Germany, Finland and France are already concerned that China could become the new place to go for cruise ship orders in the future. Others are also trying to get their share in the cruise sector, shipyards in Norway or Croatia have won orders for vessels in the expeditionary segment – peanuts, compared to the 4,000Pax units. But such orders are a start and recent contracts show that Chinese players are also starting.
In March 2017, American cruise company SunStone has signed a framework agreement with China Merchants Industry Holdings for the construction of four 108m expedition vessels with options for additional six vessels. Ulstein Design & Solutions will supply the vessel’s design and equipment package, as well as the supervision for the building process. Mäkinen, Finland, will establish a cabin assembly plant and interior workshop at the shipyard’s facilities.
What should Europeans do?
In April 2017, Viking Line signed a contract with Xiamen Shipbuilding Industry Co. concerning a new 218m 63,000gt passenger cruise ship for the Turku-Åland Islands-Stockholm route with planned delivery in 2020. The agreement also includes an option on another 2,800Pax vessel. The newbuilding will be a collaborative project, and the plan is to engage a number of Finnish and other European suppliers. Viking Line will hire Scandinavian architects for the interior design.
Cooperation, collaboration, joint ventures – European companies fluctuate between embracing the potentials of the market and fearing for their intellectual property and market position. In the end it will count whether Chinese shipbuilders will be able to efficiently and profitably build cruise vessels. The supply chains are crucial in this regard, as Mitsubishi had to learn with the AIDA vessels. But obviously the Chinese do not intend to make the same mistake of underestimating the complexity of the supply chain. Therefore, CSSC will not only build cruise ships together with Fincantieri. The companies have also agreed with the Shanghai City’s district of Baoshan to create a cruise ship industrial park. It is hoped to offer »significant growth opportunities« for the Italian suppliers of the Fincantieri group.
International cruise companies ordering in China at lower prices than in Europe are one thing, Chinese cruise companies are another thing. They will have to pay a 30% tax if they order vessels outside of China. This should work as a strong incentive to place orders at home, helping the industry to develop, a recently published white paper of Seatrade Cruise suggested.
It may take its time to build up expertise and establish a supply chain that delivers the same quality the Europeans stand for. But as Harald Fassmer, CEO of German shipyard Fr. Fassmer and President of the German Shipbuilding and Ocean Industries Association (VSM) once put it: »It is not a law of nature that the better technology comes from Germany.«
The fastest growing market
Looking at the preferred travel itineraries, destinations and on-board activities of Asian cruise passengers, it becomes clear that this market is different compared with the classic American and European cruise tourism markets. This feeds back ship design.
Two studies (»2017 Asia Cruise Trends« and »The Economic Contribution of Cruise Tourism to the North Asia Region 2016«) recently published by the Cruise Lines International Association (CLIA) show to what extend cruise tourism is contributing to the economy in Asia. What is interesting is where the growth in terms of passenger numbers comes from. In 2016, 3.1Mio. passengers from Asia went on cruises, 1.1Mio. more than just one year earlier (+55%). 68% of these people came from China which at the moment is the fastest growing cruise market. Within four years, the number of cruise vessels deployed in the Asia region has grown by 53%. 66 cruise vessels operate in Asian waters in 2017. CLIA does not see this trend to end soon, the potential is huge. Cindy D’Aoust, President and CEO of CLIA, thinks that the region could well outpace other markets in the near future.
Of the 66 vessels currently operating in the area, five are »mega vessels« with a capacity of more than 3,500 passengers, 13 ships are being classified as »large« with 2,000 to 3,500 passengers. 26 are medium-sized and 17 smaller high-quality units are active in Asia during the season. Additionally, five vessels in the expedition segment are being deployed on a temporary basis.
The economic contribution of cruise tourism in North Asia amounted to 3.23 bn $ in direct expenditures. The total contribution of cruise tourism to the three national economies of North Asia amounted to 7.21 bn $.
The Chinese efforts are understandable: Why be the fastest growing and maybe at some point largest cruise tourism market and leave the profits to European companies?
Felix Selzer
