Quora Answer: Why is Commercial Shipbuilding Unprofitable or Economically Unfeasible in the US?

The following is my answer to a Quora question: “Why is commercial shipbuilding not profitable or economically feasible in the US, even though the leading shipbuilding countries in Europe, South Korea, Japan, and Singapore, are all developed economies with high costs of labour?”

That is not strictly true.  As a former navigating officer, I did some vessel deliveries and maiden voyages, out of South Korea and Japan.  Singapore, for example, does not engage in wide-ranging commercial shipbuilding.  The market is geared towards drydocking, conversions and offshore platforms, which is a niche market.

South Korea and China dominate shipbuilding, with more than 75% of new builds coming from these two countries.  China builds are cheaper, but they are not as well finished as South Korean and Japanese builds.  They are catching up, and getting better.  They have the advantage of lower manpower cost.  South Korea and Japan use a lot of automation, which cuts down on costs.  Japanese builds are very expensive, but you are buying a vessel that almost never breaks down.  South Korean builds are not as reliable as Japanese builds, but they are cheaper.  South Korea can lower cost due to economies of scale, and the sheer amount of builds.  Japan has literal production lines for new builds that are kilometres long.  Europe has over 150 yards, but collectively have less than 10% of market share.  They build for their own markets, many of them smaller vessels for littoral waters, or the near abroad.  They build a lot of ferries, luxury yachts, and cruise ships.  This is their niche.

The US does not have a niche for international shipbuilding.  They cannot build container vessels as cheap as China and South Korea, as technically sound and as quick as Japan.  They do not have a foothold on the niche markets of FPSOs, rigs, ferries and cruise ships.  The US outsourced their production lines for the maritime industry in the same way they outsourced them for much of the manufacturing sector.  It would take massive investment to build up that sort of infrastructure to compete, and this might mean importing thousands of workers from developing countries like Singapore does, something that would be unpalatable in the current economic climate.  It might mean competing in hiring trained workers until that domestic base is built up, which will raise costs and cramp margins.  It might mean going head-to-head with established builders in niche markets, markets which may already be protected and have captive clientele.

There is one area of shipbuilding that the US does lead the world.  It is the foremost builder of warships, the largest aircraft carriers, other surface vessels and submarines.  The problem is that the client is solely the US government is most categories.