Cruise sector: Japan out, China in / ANALYSIS

Beijing to build ships for its own citizens, but Western intervention is essential

DESPITE the current uncertainties, China’s future in the cruise sector is not in doubt. Several experts estimate that its market could, by 2030, reach the maturity of the U.S. market, where 4% of the population chooses to spend its vacation at sea. Comparing the United States to China, with its population of more than 1.2 billion, makes the Asian giant’s enormous potential quite clear. It’s only a matter of time for mass tourism to be sufficiently developed. But many have set their sights on this market, and the country wants to be able to enjoy the benefits of cruise ships in industrial terms, that is, to be able to build the big ships for its own citizens.

So the agreement between China State Shipbuilding Corporation (CSSC), Fincantieri and Carnival Corporation for the construction of the first “Made in China” cruise ships should be seen in this context. The joint venture between Fincantieri and CSSC will act as “prime contractor” in the construction of two cruise ships (with option for another four) for a new Sino-US brand at Shanghai Waigaoqiao Shipbuilding shipyard. The new units will be based on a platform produced by Fincantieri for the American group and licensed to SWS, whose use is limited to the Asian market. Their design will be tailored to the tastes of the Chinese cruise passengers who will travel with a new brand created from the joint venture between Carnival, CSSC and CIC Capital. If there are no hitches, the first delivery is scheduled for 2023.

Since the late 1980s, when the cruise market boomed, the construction of cruise ships has been almost the exclusive property of a few European countries: Italy, Germany, France and Finland. United States made a tentative effort to break the European monopoly, but it was Japan’s Mitsubishi which was more successful on two occasions. However, the company ultimately failed despite the know-how that they brought to the table. Will China now be up to this challenge? The first step was not to commit to an overly demanding undertaking like what the Japanese attempted with AIDAprima, a project that proved too much even for Japan. The choice was to find a strategic partner that would bring recognized experience in the field and a shipbuilding platform that is already up to speed. So the Chinese shipyard will not debut with a prototype, but with a repetition: an established project that offers no particular technological innovation like dual fuel engines or an air lubrication system.

Western intervention is essential to “teach” the Chinese how to build a very complex technological product. Obviously, every precaution will be taken to defend Europe’s shipbuilding know-how. The greatest difficulty will be to build the network of suppliers needed to complete an industrial enterprise of this sort. To this end, a hub is being set up in the Baoshan district which will be able to support the entire network of companies that will have to be set up in the area to ensure the fitting out of the ships with interiors for their technical and hotel aspects. It is likely that many European companies will be involved, and will have an opportunity to expand their businesses, given the lack of Chinese specialists in this area. The new district will allow for financing, tax benefits and trade facilitations, as well as administrative benefits to companies that operate or set up business there.

It is not yet clear whether the schedule will be met or whether the current market slowdown will delay the company’s timeframes. In recent years we have several times heard announcements that the tycoon Clive Palmer is building the amazing “Titanic 2” in a Chinese shipyard. After several postponements, there were no further announcements. But in the case of CSSC, we are talking about a state enterprise that will certainly not want to fall short of expectations: avoiding Mitsubishi’s colossal embarrassment is a must.

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