(Jun. 11, 2010)
Tomoko Echizenya / Yomiuri Shimbun Staff Writer
After a 10-year hiatus, Mitsubishi Heavy Industries Ltd. has decided to resume manufacturing large cruise ships.
MHI's timing is curious. Although the market for passenger ships is growing, the global shipbuilding industry is facing "the 2015 problem"--in which the world's shipbuilding capacity will be three times higher than the demand five years from now.
Nevertheless, the shipbuilder that made the iconic Diamond Princess still hopes to stand apart from Chinese and South Korean shipbuilders locked in a race to lower prices.
Mitsubishi's superb technological capabilities will be a key factor in determining whether the shipbuilder can boost its presence again in the market and overcome the 2015 problem.
Construction of large cruise ships, which have been called "hotels at sea" with their grand interiors and all manner of facilities, requires more parts than regular commercial ships.
MHI boasts an advantage in being able to produce both a ship and its core parts, such as engines. However, the company has not made this an ironclad rule.
"We're willing to consider cooperating with other firms to meet the diversifying needs of our customers," an MHI executive said.
European manufacturers have dominated the large passenger ship market, mainly thanks to their track record in building luxurious cruise ships.
In 2000, a British firm placed an order with MHI to build two large cruise ships--the first time a Japanese shipbuilder had received such an order from a European or U.S. company. However, a fire seriously damaged the shipyard during construction of one of the ships, and Mitsubishi took a long time to rebuild its safety management system.
As if that was not bad enough, ripples from the collapse of U.S. investment bank Lehman Brothers in 2008 reached the shipbuilding industry, hurting the market.
MHI did not receive an order in the past 10 years. In November, however, Mitsubishi was stung by the news that Samsung Heavy Industries Co. had become the first South Korean firm to receive a cruise ship order from a U.S. company. This heightened concerns at MHI that Japanese shipbuilders' technologies could soon be eclipsed by those of their South Korean rivals. The timing could not have been worse for MHI; it was still preparing to get back in the cruise ship business.
Japan was once admired as one of the world's leading shipbuilding nations. However, South Korean companies have far more ship completions these days than Japanese shipbuilders do. South Korean companies also have been building more vessels for carrying liquid natural gas--a high-value added vessel that was once the domain of Japanese shipbuilders.
MHI still leads the field in developing state-of-the-art, low-emission engines for luxury liners. This technological superiority could be the ace up MHI's sleeve as it plans to gain a bigger share of the large cruise ship market dominated by European companies.
"We won't aim to just survive, we'll aim to win the race," a Mitsubishi executive said.
In South Korea, however, several companies other than Samsung are itching to enter the cruise ship business. If MHI loses its technical superiority, competition with South Korean rivals would likely intensify.
Elderly boosting cruise market
The global cruise market is expanding as the number of elderly people with time and money on their hands is increasing in developed countries, and cruise ship operators and travel agencies are offering a wider variety of travel plans.
Most cruise tours on large ships, such as round-the-world trips, tended to be very long. These were targeted at wealthy high-flyers and high-income earners. But in recent years, plans that will not break the bank, such as a three-day, two-night cruise costing less than 100,000 yen, have appeared on the market. This has made cruises affordable and put them within reach of ordinary people.
This trend is more evident in the United States and Europe, home to most of the world's cruise passengers.
In Japan, more and more people are going on cruises to celebrate special occasions such as retirement, although the overall number of customers itself is falling. Some analysts say this pattern could also appear in Middle Eastern countries with its wealthy population and in China, where income levels are rising quickly.
Many industry observers believe the global market for large cruise ships will continue to grow.
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