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Mitsui's main shipyard quits commercial vessels

Japanese shipbuilder contends with the rise of Chinese and South Korean rivals

Mitsui E&S' Chiba shipyard. The site has been unprofitable due to a supply glut and intense competition overseas.

TOKYO -- Mitsui E&S Shipbuilding will stop making commercial ships at a major shipyard outside Tokyo as the business remains a perennial money loser due to intense competition with Chinese and South Korean rivals.

The Chiba shipyard will not take new orders after completing a large tanker slated for delivery at the end of 2019. Commercial shipbuilding will now be contracted out to partner Tsuneishi Shipbuilding.

The facility has three docks, with the largest one capable of handling 300,000-ton supersize tankers that stretch 400 meters from stern to bow. The shipbuilding segment's 800 employees will be transferred within the yard.

Another Mitsui E&S mainstay shipyard in Okayama Prefecture will focus on producing naval vessels for Japan's self-defense forces. The facility may take some commercial ship orders, but the company will effectively withdraw from the business and pivot toward operations like environmental engineering. The company, which is part of Mitsui E&S Holdings, plans to shift its resources to such fields as offshore platform engineering and wind power.

The company formed a business alliance with Tsuneishi in May. Construction of large commercial vessels will be handled by Tsuneishi's overseas bases in the Philippines and elsewhere.

Japan's other heavy industry manufacturers are also shrinking shipbuilding operations. In January,  Mitsubishi Heavy Industries spun off operations in a major Nagasaki Prefecture shipyard into a subsidiary that will also handle products like marine structures, such as oil storage barges.

Kawasaki Heavy Industries closed one of two docks at its shipyard in Kagawa Prefecture last year and moved the bulk of its commercial ship production to its Chinese joint venture.

Japan's shipbuilders controlled nearly half of the global market until the 1990s. Since the 2000s, however, their commercial shipbuilding segments have been chronically in the red due to cost competition from Chinese and South Korean rivals.

This intense competition has created a supply glut in recent years. Shipyards in China and South Korea are being forced to shut down or declaring bankruptcy as ship prices sink to nearly half their peak.

Japan's shipbuilders now face the choice of narrowing their domestic operations to value-added products like naval vessels and ferries or switching to such operations as engineering that involve only design work.

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