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Japan's leading shipbuilder to invest in new dock

TOKYO -- Japan's largest shipbuilder, Imabari Shipbuilding, has decided to spend 40 billion yen ($335 million) constructing a large dry dock.

     The decision, which came Jan. 29, marks a turnaround of sorts.

     Japan's shipbuilding industry suffered a sharp drop in orders after the Lehman shock of 2008. With shipping companies having less business, they found themselves with a glut of boats. Their fleets were so bloated that Japan's shipbuilding industry feared it would not receive any orders for 2014.

     However, the number of orders have been picking up, and Imabari recently received an order for 11 containerships, each capable of carrying roughly 20,000 containers. That will put them right up there among the world's largest.

     The order is estimated to be worth 210 billion yen.

     The new dock, scheduled to be completed in October 2016, will be one of Imabari's largest shipyards. The 11 containerships will be built there.

     Imabari was founded in 1901 and gained a solid foundation under the leadership of Chairman Toshiyuki Higaki. In 2005, Higaki's eldest son, Yukito, then in his 40s, became president of the company, which in the past 15 years has tripled its tonnage output.

     The unlisted company logged group sales of 403.3 billion yen in fiscal 2013.

     Japan used to control more than 50% of the global shipbuilding market on a tonnage basis. But in the 2000s, Chinese and South Korean companies, with larger economies of scale and better cost competitiveness, began outdoing Japan. By 2013, Japan's share of the market was 20%.

     But the yen -- which was so strong in 2011 and 2012 it took less than 80 to buy a dollar -- has since significantly weakened. At the end of 2014, it took around 120 yen to buy a dollar. A weak currency helps exporters, and the yen's fall should bring Japanese shipbuilders more orders.

     Yukito Higaki is now 52. He is fond of saying that "achieving a 30% slice of the market is necessary for Japan to show its presence."

     The weaker yen was not alone in prompting Imabari to make its first big investment in 16 years. Geography also played a part.

     One of Imabari's strengths is that it integrates operations in the Seto Inland Sea, in western Japan, home to various ship-related industries, from electric component makers to welders. The company has grown by putting nearby shipbuilders under its umbrella and currently has nine dockyards in the area, including the Tadotsu Shipyard, which it acquired from major Japanese shipbuilder Tsuneishi Holdings on Jan. 1.

     The area has other benefits as well:

  • More than 30% of domestic ocean-going vessels belong to shipowners in and around Ehime Prefecture, where Imabari is headquartered.
  • Iyo Bank and Ehime Bank, both of which operate in the area, offer financing to encourage ship ownership.   

     Imabari accounts for Japan's largest annual ship output. In 2013, its group companies built 3.84 million tons worth of boats, primarily bulk carriers. That is nearly eight times more than Mitsubishi Heavy Industries built.

     The company also churns out a wide variety of vessels, which allows it to keep earning even when the containership market is in the doldrums.

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