Japan's Sumitomo Heavy Industries has adopted a resolution whereby one of its subsidiaries will withdraw from the business of building new general commercial vessels, the company said in a statement on Wednesday, February 14.
The company's shipbuilding business Sumitomo Heavy Industries Marine and Engineering (SHI-ME) originated with the establishment of Uraga Senkyo Corporation in 1897. Since then, it has been operated alongside the manufacturing and repair activities for Besshi Copper Mines, another original venture by Sumitomo.
In 2003, the shipbuilding business was spun off from the company into the separate entity SHI-ME, which focuses on construction of middle-size tankers.
Sumitomo said the bankruptcy of American financial services firm Lehman Brothers in 2008 and other factors contributed to a "deteriorating environment" for the shipbuilding business, which also included a rapid decline in ship prices. SHI-ME implemented various measures, including limiting the number of vessel orders it accepted and overhauling its shipbuilding system.
However, anticipating the necessity to address the rising prices of steel and other materials and equipment, along with significant fluctuations in vessel prices and persisting intense competition with overseas companies due to an increasing supply-demand gap, the board of directors of Sumitomo have extensively deliberated on the future of the shipbuilding business together with SHI-ME.
Sumitomo said that, as a result, it has found it challenging to sustain the shipbuilding business and has decided not to accept new orders for general commercial vessels from FY2024 onwards, with plans to exit the business after completing all backlogs of orders received by the end of FY2023.
Sumitomo clarified that it is committed to fulfilling its obligations by completing the construction and delivery of all backlogged new vessels. In addition, SHI-ME will continue to provide after-sales service for previously constructed vessels and continue to engage in ship repair.