Dive Brief:

• Mitsubishi Heavy Industries plans to scale down its shipbuilding capacities and concentrate on building small vessels and marine engines, sources told The Wall Street Journal this week.
• The decision was spurred by a large decline in ship orders and a $1 billion loss following a one-year-delayed delivery of a cruise ship built for Carnival. Year-over-year, Japanese shipyards have seen an 80% loss in sales.
• Mitsubishi's decision is part of a larger trend wherein overcapacity, shrinking demand, and historically low freight rates are decimating the need for production. The billions of dollars in resulting losses are spurring increased consolidation and new alliances throughout the industry.

Dive Insight:

It's hard to separate the shipbuilding industry from the shipping lines: after all, the shipyards' production schedules depend almost entirely on the lattes' demands. The general consolidation and downturn of the shipping industry, due as much to over-preparation as to a capacity arms race, is having a significant impact on shipbuilders.

The problem is that ships are durable, expensive goods. Fortunately for shipyards, as technology and visibility needs increase, so does the need for upgrades. But not every shipbuilder will be able to cash in on an increased demand for reefers, for example.

Last week Supply Chain Dive reported that shipbuilders may consolidate to increase synergies and share costs, but Mitsubishi's decision to downsize points to another option. Shipbuilders with broad capabilities may reduce their offerings and hone in on a few services to improve their competitive advantage.