Who keeps the profit in the global shipbuilding boom?

Shipbuilding is a chain of businesses. It begins with safety rules, designs and fuel choices; passes through engines, cargo systems and a limited supply of yard slots; and ends with a vessel that an owner or navy must operate for 30 years or more. The current boom combines three long-running shifts: Asia’s rise in merchant-ship construction, LNG’s transformation of ships into exercises in cryogenic engineering, and governments’ renewed demand for warship capacity. Order books are fuller than they have been for years, yard revenue is rising and naval budgets are expanding. The question for investors is which parts of the chain retain the gains.

A yard earns well only if it prices a scarce slot effectively and delivers the vessel as planned. More durable profits tend to accrue to companies with difficult-to-replace expertise, specialised equipment or a ship fleet that generates repeat service work.

A ship is a promise made before it exists

On the night of 14 to 15 April 1912, the Titanic struck an iceberg on her maiden voyage and sank in the North Atlantic, killing more than 1,500 people.¹ She had been built by a leading yard, classed and insured, and marketed as close to unsinkable. The disaster showed that a ship’s safety could not rest solely on the judgement of those who built, owned and sold it. Maritime powers met in London and, on 20 January 1914, signed the first International Convention for the Safety of Life at Sea, or SOLAS. It set common rules for lifeboats, radio watches and construction.² War delayed its entry into force, but the underlying principle endured: safety requirements would be established before a ship was designed.

That history explains a feature of the industry that can be easy to overlook. Before steel is cut, a ship is a bundle of promises. The yard commits to a vessel with specified speed, capacity and fuel consumption by a stated date. The owner offers the lender a hull that will retain value as collateral. The insurer agrees to cover a loss. A flag state assures other governments that the vessel meets international rules, while cargo owners depend on tanks that do not leak. Since none can inspect every weld, they rely on an independent referee.

That referee is the classification society. Class functions somewhat like a passport: without it, a ship may struggle to obtain insurance, finance or access to many ports. But the analogy only goes so far. A passport is checked at a border and then put away; a class certificate is reassessed through periodic surveys over the vessel’s life and can be suspended or withdrawn when standards are not met.

Insurers who needed a referee

The referees emerged before the modern shipbuilding industry because finance required them first. In 1864, a group of Norwegian mutual marine insurers founded Det Norske Veritas to assess ships’ seaworthiness under common rules rather than each insurer’s own judgement.³ Three years later, shipowners, shipbuilders and insurers in Hamburg founded Germanischer Lloyd for similar reasons. The institutions remained separate for almost 150 years before merging in 2013 as DNV.³ The purpose was financial as well as safety-related. Lenders are reluctant to fund a hull they cannot value, and insurers cannot readily cover a risk they cannot measure. Class made ships more legible to both.

Today, classification societies write technical rules for designers, approve drawings, survey hulls under construction and certify completed vessels. DNV’s maritime business classes ships and advises owners and yards on technology and regulation.⁴ The American Bureau of Shipping performs similar work for commercial and naval customers, while Bureau Veritas $BVI.PA operates within a broader testing and inspection group. None builds ships. Their influence comes from their role in bringing new fuel systems, hull forms and cargo tanks into service.

The financial returns appear more modest than that gatekeeping role might suggest. DNV reported group revenue of about NOK 35.3 billion in 2025, less than 1% higher than a year earlier, though the total also includes energy and other assurance businesses.⁵ Bureau Veritas reported €558 million of 2025 revenue from Marine & Offshore, an increase of about 11%, and classed more than 12,000 units.⁵ Neither company, nor privately held ABS, discloses a directly comparable profit figure for shipbuilding-related work alone. The available figures suggest that class income tracks the size and complexity of the global fleet rather than surging when yard slots are scarce.

The engine becomes the heart

The second thread began in a laboratory. In 1897, in Augsburg, Rudolf Diesel and technicians at the company now called MAN Energy Solutions produced the first working diesel engine.⁶ Diesel sought greater efficiency than contemporary steam plants could offer. His compression-ignition design converted more fuel energy into work and, within decades, became central to ocean shipping.

An engine does more than propel a ship. Once an owner selects one, the decision shapes fuel tanks, piping, exhaust treatment, crew skills and service contracts throughout the vessel’s life. Replacing it later is possible but expensive, much like rewiring a house. The engine choice is therefore also a long-term bet on fuel availability and cost, giving the designer and licensed manufacturers a revenue opportunity long after the yard has been paid.

MAN Energy Solutions remains a leading designer of the large two-stroke engines used by most deep-sea merchant ships. It reported revenue of about €4.3 billion in 2024, up 7%, and is owned by Volkswagen rather than listed separately.⁵ Much of its technology reaches ships through licensees that manufacture engines to its designs, a relationship considered later in this story.

What the rule-makers can and cannot capture

Regulation and technical assurance have long shaped what gets built. The fuel transition has made that influence more visible, as new systems require approval before they can enter service.

The constraint matters as much as the influence. Class is essential, but it is rarely the bottleneck. Surveyors can be hired and trained faster than a dock can be built, and owners can switch societies when fees or service are unattractive. Competition and the fee-based model make class income relatively steady, but limit its ability to capture the scarcity rents that arise when capable yard slots are booked years ahead. Gatekeepers are paid for access; scarcity rents flow to those who control the scarce asset.

Safety rules standardised ships. The next revolution would standardise their cargo as well.

↑ Back to Top

The box, the tanker and the coldest cargo on earth

On 26 April 1956, a converted second-world-war tanker called the Ideal X left Newark, New Jersey, for Houston with 58 metal boxes on deck.⁷ Its owner, the trucking entrepreneur Malcolm McLean, had spent years frustrated by the time required to load ships piece by piece: sacks, crates and barrels lifted individually by dockworkers. His idea was to load the truck body, or at least its box, directly onto a ship.

Containerisation extended factory-style standardisation from the warehouse to the quay. Goods could be packed at a factory and left untouched until reaching their destination. Yet standardised cargo required more specialised ships: cellular holds, larger cranes and quicker port calls, followed by vessels carrying more than 10,000 boxes.

For shipbuilders, containerisation created a customer that ordered large series of broadly similar vessels as trade expanded. A.P. Moller - Maersk $MAERSK-B.CO, the Danish group that became the largest container line of the late 20th century, was part of that shift, and its fleet orders became an important source of yard demand.⁷ Maersk’s economics, however, still depend on freight rates, fuel costs and asset utilisation. Its 2025 revenue was about $54 billion, down 2.7% from a year earlier.⁵ A container line ordering ships gives a yard work, but it is primarily making a bet on freight markets rather than shipbuilding margins.

A gas that had to be frozen

A separate problem emerged around the Mediterranean in 1956. Algeria had large natural-gas reserves and Europe wanted the gas, but a pipeline route across the sea had become politically unworkable.⁸ The alternative was liquefaction. At about minus 163°C, methane shrinks to roughly one six-hundredth of its gaseous volume.⁸ Shipping then becomes practical, but the vessel must contain an extremely cold cargo without allowing the cold to crack the ordinary steel hull around it.

Two French teams developed different solutions. In 1963, Gazocean, a shipping company owned by Gaz de France and the Japanese line NYK, created Technigaz to develop a membrane concept from the engineer Bo Bengtsson Iversen. The first patent followed in 1964, and the first LNG carrier using Technigaz technology entered service that year.⁸ In 1965, Audy Gilles founded Gaztransport around Pierre Jean’s work on an Invar membrane. The nickel-iron alloy changes little in size with temperature, and it was tested in an experimental cargo system. In 1969, the Polar Alaska entered service with Gaztransport technology.⁸

The thermos inside the hull

A membrane tank can be pictured as a thermos built into a ship. A thin metal barrier, only millimetres thick, contains the liquid gas. Layers of insulation sit behind it, followed by the ship’s inner hull. The insulation protects the steel from the cold, while the hull supports the system.

The comparison has an important limit. A thermos is a self-contained vessel; a membrane tank has no structural strength of its own. It carries none of the ship’s load and depends entirely on the hull for its shape and support. That makes the system efficient because it follows the hull closely, but demanding to build because small welding or insulation defects can matter greatly.

The two companies merged in 1994 as Gaztransport & Technigaz $GTT.PA, bringing both membrane technologies into one business.⁸ GTT does not build ships or own docks. It licenses its technology to shipyards, provides engineering and approval support, and receives a royalty for each ship built with its systems. Its public-offering documents say those fees are recognised as construction progresses.⁹ The company resembles a patent-holding design business more than a manufacturer.

That model produces unusually high returns. In 2025, GTT reported a 64.5% operating margin on €803 million of revenue and a 73% return on capital employed.⁵ Each LNG carrier built in Korea or China using its designs can generate fees for GTT without requiring it to finance the hull or yard capacity.

The drought that tested the idea

A better technology alone does not guarantee profit. From 1978 to 1990, neither Gaztransport nor Technigaz received a new-ship order.⁸ The technology worked and ships continued to sail, but there was insufficient new LNG trade to justify additional carriers. The companies survived through research and onshore-storage work.

The lesson extends beyond LNG. A technical advantage earns money only when customers need the capacity it enables, and that demand follows energy prices, trade patterns and political decisions outside a licensor’s control. GTT’s recent figures show the same cyclicality: revenue grew 25% in 2025, but was flat in the first half of 2026, while its order backlog stood at €1.9 billion at the end of June 2026.⁵ Its position in membrane containment has endured, but its earnings remain linked to LNG demand.

By the 1960s, containerisation had created demand for volume and LNG for technical complexity. Both would find an answer in East Asian industrial policy.

↑ Back to Top

The beach at Ulsan and the migration east

In March 1972, 정주영 Chung Ju-yung broke ground on a stretch of beach at Ulsan, on Korea's south-east coast.¹⁰ Chung, the son of a farmer with little formal schooling, had built Hyundai from a car-repair shop into a construction business supported by post-war rebuilding and government contracts. He had never built a ship. Hyundai says he secured its first supertanker order partly by showing a Greek shipowner a Korean banknote depicting a sixteenth-century armoured “turtle ship”, arguing that Koreans had built ships before. The company then constructed the yard and its first two tankers simultaneously.¹¹ Those first very large crude carriers were named in 1974.¹¹

The image of a beach becoming a shipyard understates the task. A modern yard requires dry docks, heavy cranes, steel-cutting halls, block-assembly lines, naval architects, subcontractors and thousands of trained welders, pipefitters and electricians. Hyundai initially imported much of its design expertise. Building that capability took decades, which helps explain why new yards are easier to announce than to bring into full operation.

How the industry moved east

The Ulsan project was part of a long migration of shipbuilding from west to east. European yards rebuilt merchant fleets after the second world war and initially led the market. Japan then advanced through an export-manufacturing model built on large yards, standard designs, ties to steelmakers and trading houses, and disciplined production. By the late twentieth century, Korea had displaced Japan by combining state support, chaebol capital, imported technology and a willingness to accept large contracts before its capabilities were fully established.

Each handover followed a similar pattern. New entrants began with simpler, lower-cost ships and moved into more complex vessels. Incumbents retained specialised work until their cost base became uncompetitive even there.

The Ulsan yard is now held through HD Korea Shipbuilding & Offshore Engineering $009540.KS, which controls the group’s yards, including the Ulsan operating company HD현대중공업 HD Hyundai Heavy Industries $329180.KS. Because the holding company consolidates HD Hyundai Heavy’s results, their accounts overlap and should not be added together.⁵ The group’s position rests less on a single patent than on accumulated execution: integrating engines, cargo systems and hundreds of suppliers into LNG carriers, large container ships and dual-fuel tankers, then delivering them on schedule.

China's different route

China followed a path that market-led rivals could not readily reproduce. In July 1999, Beijing divided its old state shipbuilding system into China State Shipbuilding Corporation, concentrated mainly in the east and around Shanghai, and China Shipbuilding Industry Corporation, concentrated mainly in the north.¹² In 2019, it recombined them as 中国船舶集团 China State Shipbuilding Corporation, one state group.¹² The split fostered competition during a period of industrial learning; the merger later brought scale and coordination after China had become the world’s largest shipbuilder.

State ownership changes the terms of competition. Chinese state yards can draw on state-owned steelmakers, engine and equipment suppliers, banks, leasing companies and shipowners under common central supervision. That structure can reduce costs and smooth demand in ways Korean and Japanese private-sector groups cannot easily match. The listed flagship, 中国船舶 China CSSC Holdings $600150.SS, reported 2025 revenue of about $21 billion, nearly twice the previous year’s level. Much of the increase reflected a 2025 merger that brought in yards from another listed group, making it the world’s largest listed shipbuilder.⁵

The industry is consequently concentrated. Shipping carries more than 80% of world merchandise trade, according to UNCTAD, the United Nations trade and development agency.¹³ China, Korea and Japan together delivered 91% of global new gross tonnage in 2025.¹⁴ China alone had about 120 active yards, roughly 45% of global yard capacity and around 60% of the global orderbook.¹⁵ UNCTAD said China had narrowed the technology gap, while Korea and Japan remained strong in gas carriers, tankers and container ships.¹⁵

Does scale guarantee returns?

China’s scale clearly supports volume, but the industry’s history offers a narrower conclusion on returns. Europe lost share to Japan, and Japan to Korea, despite each retaining strengths in higher-value work. China’s model may be harder to replicate because it encompasses a national supply chain as well as shipyards. Yet that capacity can also amplify overcapacity: a system able to add docks rapidly can flood the market when demand weakens. Scale has secured market share; it has not consistently secured margins, and its durability in the next cycle remains untested.

The industrial system now supporting the boom had already built too many ships before 2008.

↑ Back to Top

The orderbook trap

In 2008 and 2009, the global financial crisis hit a shipping industry that had ordered for a world of permanently rising trade. For most of the preceding decade, China’s demand for iron ore, coal and oil had driven freight rates to extraordinary levels, while owners ordered ships faster than yards could readily build them. Trade then stalled, freight rates collapsed, bank lending to shipping dried up, and owners that had ordered at the peak sought to cancel, delay or renegotiate contracts.¹⁶

An orderbook is like a restaurant’s reservations book: a full one is reassuring, but it does not reveal whether prices cover costs, whether inputs will become more expensive before service, or whether the kitchen has enough staff. Some customers may not arrive. The comparison understates the risk. A restaurant can reset prices each season; a shipyard commonly fixes its price years before delivery.

Too many ships, for years

Ships ordered during the boom continued to arrive after demand weakened. Excess tonnage depressed freight rates; weak rates discouraged new orders; and yards that had expanded for the boom were left short of work. UNCTAD reported that seaborne trade grew at its slowest pace since 2009 during the middle of the decade, while overcapacity continued to weigh on the industry.¹⁸ By 2015 and 2016, orderbooks in the main vessel categories were far below their 2008–09 peaks, yet the fleet remained too large.¹⁷

In August 2016, Hanjin Shipping, then Korea’s largest container line, entered receivership. Its ships were left at sea with cargo aboard while some ports refused to handle them.¹⁷ The failure illustrated a risk for builders: a contract with a weak owner is worth only as much as that owner’s ability to take delivery.

Why a full yard can be a dangerous one

The less obvious lesson was that yards could lose money while remaining busy. Most commercial newbuilding contracts are fixed-price: the yard agrees to deliver a vessel two to four years later for a price set at signing. Steel and labour costs can rise, exchange rates can move against the yard, subcontractors can fail, and design changes or late delivery can trigger penalties. A builder that filled docks with cheaply priced work, or accepted an unfamiliar vessel type, could lose money on every delivery.

Payment schedules can obscure that risk. Owners generally pay deposits at signing and further instalments at milestones such as steel cutting, keel laying and launch. Those advances can support cash flow even as a contract heads towards a loss; the final margin becomes clear only when the ship is delivered and costs are fully recognised. UNCTAD’s work on maritime financial resilience describes how the gap between cash receipts and underlying risk can expose lenders and builders when the cycle turns.¹⁹

Korea’s complex-vessel yards experienced this in the 2010s, when aggressively priced offshore oil platforms and early LNG projects produced substantial losses. 한화오션 Hanwha Ocean $042660.KS, known as Daewoo Shipbuilding & Marine Engineering before Hanwha took control, was the clearest example: its operating margin was negative 33% in 2022.⁵ 삼성중공업 Samsung Heavy Industries $010140.KS, a specialist in LNG carriers and offshore units, recorded a negative operating margin of 14% that year.⁵

Both recovered sharply by 2025, reporting operating margins of 11.1% at Hanwha Ocean and 16.9% at Samsung Heavy.⁵ That recovery indicates that contracts negotiated in 2021 and 2022, when delivery slots became scarce, were reaching completion on substantially better terms than earlier loss-making work. It does not establish that the industry can maintain pricing discipline across every contract.

Is this boom different?

There is a substantive case that it is. Current orders reflect not only growth in bulk trade, but also replacement demand from ageing fleets facing tighter fuel rules, LNG investment and naval rearmament. Global yard capacity is smaller than at the previous peak: UNCTAD counted about 348 active shipbuilding facilities in 2024, fewer than half the 739 recorded in 2007.¹⁵ Listed commercial yards were spending about 2.6% of revenue on capital investment, below their usual 3.1%, suggesting that Korean and Japanese builders, at least, were not rapidly adding docks.⁵

The counterargument is equally concrete. China can add capacity faster than listed-company figures suggest. Some new demand depends on fuel regulation that remains unsettled, as later chapters examine. And the previous boom also appeared structural before trade weakened. The current cycle has broader foundations, lowering rather than eliminating the risk. The decisive measures will be margins on delivered ships, loss provisions, yard labour costs and whether contract prices hold when delivery slots begin to open.

After the last crash, regulation made a ship’s fuel and design a more urgent reason for replacement.

↑ Back to Top

The fuel decision that nobody can make once

On 1 January 2020, the maximum sulphur content permitted in ship fuel outside special control areas fell worldwide from 3.5% to 0.5%.²⁰ Owners faced an immediate operating choice: buy more expensive low-sulphur fuel, install exhaust scrubbers to continue using cheaper high-sulphur oil, or change fuels. Each option created demand for refiners, equipment makers and repair yards able to install scrubbers in dry dock. The rule also demonstrated that an International Maritime Organization rule could alter purchasing decisions across the global fleet on a single date.

Half a century of rules

The 2020 deadline emerged from a long regulatory history. The IMO adopted the International Convention for the Prevention of Pollution from Ships, known as MARPOL, on 2 November 1973 after a series of tanker accidents. The combined 1973/78 convention entered into force on 2 October 1983, embedding pollution prevention in ship construction and operation.²¹ In 1997, the IMO added Annex VI on air pollution, which took effect on 19 May 2005. A 2008 revision set the path towards a global 0.5% sulphur cap.²² At its October 2016 meeting, the IMO's Marine Environment Protection Committee confirmed 1 January 2020 as the deadline, rejecting calls for delay.²³

Attention then shifted from sulphur to carbon. Two measures followed: the Energy Efficiency Existing Ship Index, a design standard for ships already in service, and the Carbon Intensity Indicator, an annual operating rating based on a ship’s carbon emissions per unit of transport work.²² A poorly rated vessel must improve or risk becoming harder to charter. In April 2025, the committee's 83rd session approved draft legal text for an IMO net-zero framework. It combines a global fuel standard, requiring the greenhouse-gas intensity of ship fuel to decline over time, with an emissions-pricing mechanism for ships above 5,000 gross tonnes.²⁴ The IMO described it as the first global framework of its kind for an entire industry.²⁵

The operative word is “draft”. The cited record shows approval of draft text; formal adoption, detailed implementing rules, enforcement and the supply of compliant fuel remain unresolved. A policy signal is not a settled regime, and owners ordering ships must make decisions before those questions are answered.

A house wired for two power systems

Owners have largely responded by paying for flexibility. A dual-fuel engine can run on conventional marine fuel as well as an alternative such as LNG or methanol. It is like wiring a house for two incompatible power systems so that the owner can use whichever is cheaper or permitted. The analogy breaks down because a household knows which utility is available today, whereas a shipowner must judge which fuel will be affordable, available at relevant ports and accepted by regulators over decades.

The options are numerous, and none is complete. LNG is available now, but methane released unburned from engines reduces its climate benefit. Green methanol remains scarce. Ammonia contains no carbon but is toxic, and its engines are still at an early stage. Hydrogen is difficult to store on board; biofuels face supply constraints; and batteries are suited mainly to short routes. Research firm Clarksons estimated that roughly one-third of tonnage ordered in 2025 could use an alternative fuel, led by LNG dual-fuel vessels.²⁶ The remainder consisted of conventional ships or ships described as “ready” for later conversion—a materially weaker commitment.

Who gets paid when uncertainty becomes a specification

Fuel uncertainty raises costs for owners, but it also turns into specifications and orders for suppliers. Class societies interpret new rules and approve designs. GTT licenses membrane tanks for LNG carriers and LNG fuel tanks on dual-fuel container ships. MAN Energy Solutions designs two-stroke dual-fuel engines, while licensed manufacturers build and service them. In Korea, these include HD Hyundai Marine Engine and Hanwha Engine; in Japan, Mitsui E&S, which exited conventional shipbuilding to focus on marine machinery; and in China, CSSC Marine Power, part of the state group. STX Engine, another Korean company, makes marine and defence engines.

Recent figures suggest that demand has been strongest in equipment. HD Hyundai Marine Engine’s revenue grew 27% in 2025, and its operating margin nearly doubled over three years, reaching nearly 25% in the June 2026 quarter.⁵ Hanwha Engine moved from a loss in 2022 to a margin of about 10% in 2025.⁵ In the June 2026 quarter, combined growth across the equipment layer accelerated by almost 12 percentage points from the preceding two quarters, while growth at commercial yards slowed slightly.⁵ That pattern is consistent with yards ordering engines and cargo systems after securing a hull slot: equipment demand may lag yard orders and continue rising after new yard orders peak. The evidence is suggestive rather than conclusive, since most suppliers do not disclose comparable marine order intake.

Four large diversified groups also supply the transition. Wärtsilä $WRT1V.HE makes engines, propulsion and fuel systems, and derives much of its revenue from servicing ships already in operation. Its Marine business accounted for about 57% of group sales in the first half of 2026.⁵ Kongsberg Gruppen $KOG.OL supplies bridge systems, automation and propulsion through Kongsberg Maritime, whose revenue grew about 10% in 2025.⁵ Alfa Laval $ALFA.ST sells fuel-treatment, heat-exchange and emissions equipment, and its marine division grew about 9% in 2025.⁵ ABB $ABBN.SW supplies electric propulsion and power systems through a marine and ports business that it does not report separately in the available data. These disclosures do not isolate profits from shipbuilding, making the theme’s effect on shareholders difficult to measure cleanly.

Will every low-carbon ship pay?

A common claim is that every supplier with a low-carbon product will benefit. The record is less certain. GTT’s 13-year order drought shows that an approved engineering solution can wait decades for demand to justify new capacity. The IMO framework remains draft text. Owners may also operate dual-fuel ships on conventional fuel for years if alternatives remain costly, reducing the service revenue suppliers expect from the new systems.

The evidence supports the narrower conclusion that the transition is creating demand for equipment. It does not show that every low-carbon product will earn high margins. Stronger proof would include alternative fuels being bunkered at scale, charterers paying more for cleaner ships, and a fuel standard entering force with meaningful penalties.

This uncertainty makes the most valuable part of a new ship look less like the hull and more like a system-integration project.

↑ Back to Top

Where a ship's dollar goes before it reaches the sea

Consider a new LNG-capable container ship. Years before it sails, owner and yard agree an outline specification: capacity, speed, fuel system, delivery year and price. The owner pays a deposit, often financed by a bank or leasing company. The class society reviews the design. A naval architect, often employed by the yard, designs the hull around an engine selected from a designer's catalogue and a fuel-tank system licensed from a specialist. Steel plate arrives from a mill; insulation, valves, pipework, switchboards, automation and navigation systems come from dozens of suppliers. The yard cuts, welds and assembles large blocks, joins them in a dock, installs machinery, completes sea trials and hands over the vessel. Thereafter, dry docks and engine-makers’ service teams maintain it for three decades or more.

The conductor's dilemma

The yard is the visible centre of the process, which can make it appear to be the industry’s main profit pool. It is more like an orchestra conductor: it must bring every instrument together, on time, for a single performance. But it is paid a fixed fee and bears the cost when an instrument is late or out of tune. A delayed engine can leave a dock idle. A cargo system that fails testing creates rework at the yard’s expense. Rising steel prices or wages are not recoverable under a fixed-price contract. The yard therefore carries much of the chain’s execution risk.

The economics upstream differ. GTT earns licence and engineering fees without owning a dock, helping explain margins around five times those of a strong yard. Engine designers and licensed manufacturers earn revenue when an engine is built and through decades of parts and service. When engine lead times extend, an engine slot can determine the vessel’s delivery date. Korean specialists also earn revenue where LNG specifications require exacting quality. DongSung Finetec and Korea Carbon supply insulation panels and materials for membrane tanks, while Hylok makes precision fittings and valves. In 2025, their operating margins ranged from about 10% at DongSung Finetec to 27.5% at Hylok.⁵

Further upstream, Nippon Steel $5401.T and POSCO Holdings $005490.KS sell marine plate to Japanese and Korean yards. Their operating margins were 4.5% and 2.6% in their latest fiscal years, while ships accounted for only a small part of their businesses.⁵ They matter here because they determine an important yard input cost, not because they capture much of shipbuilding’s profit. The same caveat applies to combined equipment-layer figures. The two steel groups dominate its revenue, so their inclusion pulled the layer’s combined operating margin to 4.5% in the June 2026 quarter and obscured the higher margins of marine specialists.⁵

The yards, and why counting ships misleads

Commercial yards are a varied group. China has China CSSC Holdings, the state-backed China Merchants Industry, private New Times Shipbuilding and Singapore-listed 扬子江船业 Yangzijiang Shipbuilding. Korea has HD Korea Shipbuilding and HD Hyundai Heavy, Hanwha Ocean and Samsung Heavy. Japan has privately held 今治造船 Imabari Shipbuilding and Japan Marine United, alongside listed Namura Shipbuilding and Oshima Shipbuilding, a bulk-carrier specialist. Europe includes Italy’s Fincantieri $FCT.MI, family-owned Dutch group Damen Shipyards and Germany’s Meyer Werft. Seatrium in Singapore builds offshore and specialised vessels.

Counting deliveries alone is misleading, like comparing construction companies by completed buildings without distinguishing a garden shed from a hospital. Cruise ships, LNG carriers, bulk carriers and product tankers require very different amounts of labour, equipment and engineering. The industry therefore uses compensated gross tonnes, which adjust vessel size for building complexity. A yard’s vessel mix says more about its prospects than its ship count.

What happens after delivery

Delivery turns the vessel into a maintenance customer for the rest of its life. Every few years, it must leave the water for inspection and repairs in a dry dock, a facility that can be drained to expose the hull. A dry dock resembles a car-service bay, except that it takes years and waterfront space to build. The analogy has an important limit: a car owner rarely postpones maintenance because business is strong, whereas an owner earning unusually high freight rates may defer docking to keep a vessel trading.

HD Hyundai Marine Solution $443060.KS emerged from the HD Hyundai group’s shipbuilding operations. It sells parts, retrofits, maintenance, fuel-related and digital services to group-built ships and other vessels. In 2025 it reported a 17.7% operating margin and return on capital employed above 40%, reflecting recurring demand for parts from the installed fleet whether or not new ships are ordered.⁵ India’s Cochin Shipyard builds and repairs ships, with repair contributing about one-third of revenue in its latest fiscal year.⁵ Babcock International operates British naval dockyards and support services; its Marine segment grew about 10% in its latest fiscal year.⁵

Different capital burdens, not a fixed ranking

The June 2026 quarter puts the layers side by side. Combined commercial-yard revenue rose 49.5% year on year and operating margin reached 12.8%. The two listed repair and lifecycle businesses grew 18.3%, with a 16.3% margin—six percentage points below a high base a year earlier. GTT’s full-year 2025 margin, noted earlier, was about five times that of the yards.⁵

The gap reflects differing capital needs and risk per dollar of revenue. A licensor with no dock, a service business holding parts inventory and operating some docks, and a yard financing docks, cranes and a large workforce under fixed-price contracts should not be expected to earn identical margins. Nor is the ranking fixed: when slots are sufficiently scarce, a well-run yard can earn more than a service business, as Yangzijiang’s figures later show.

What the links between layers do and do not show

It is tempting to assume that stronger shipowner earnings quickly translate into higher yard revenue. Empor’s tests of short-term movements across the layers do not support that assumption. Among eleven listed commercial yards, revenue growth generally moved against owners’ combined revenue, and only one showed the expected pattern.⁵ The timing explains much of the result. Yard revenue in a given quarter comes from ships ordered two or three years earlier, while owners’ current earnings affect orders that may not become yard revenue for years. In 2023, for example, owners’ combined revenue fell by almost 40% as container rates retreated from their pandemic peak, while yard revenue rose 31% on orders placed during that peak.⁵

Owners’ revenue is therefore a poor guide to yard sales over the following quarters. It is more useful as a broad measure of customers’ capacity to order, repair and upgrade vessels. In the June 2026 quarter, owners’ combined revenue was about $55 billion, up 24% year on year, led by tanker companies benefiting from higher oil prices.⁵ The two repair businesses did move with owners’ revenue in that quarter, consistent with better-funded owners booking more dockings. But two companies and a few years of correlation provide evidence, not proof.

Every layer of the chain has its own way of retaining, or surrendering, profit.

↑ Back to Top

The contests inside the boom

An owner seeking an LNG carrier, a large container ship or a very large crude tanker can take the enquiry to several regions, each offering a different combination of price, delivery slot, financing and technical capability. Chinese yards offer scale, relatively rapid slots and access to domestic state lenders and suppliers. Korean yards have the deepest experience in complex gas carriers and dual-fuel ships. Japanese yards retain specialist positions and relationships with domestic owners. European yards compete in cruise ships, naval vessels and other high-specification work. India and Taiwan are attempting to rebuild capacity with government support. Where an order is placed—and on what terms—helps determine where its profit ends up.

China: scale that still has to earn a margin

China CSSC Holdings brought the largest listed group of yards together in 2025 and is converting the order wave into revenue quickly: June-quarter revenue nearly doubled from a year earlier.⁵ Profitability remains modest relative to that scale. Its 2025 operating margin was 7.2%, rising to roughly 10–13% in recent quarters.⁵ Its latest results substantially exceeded revenue forecasts but missed earnings forecasts by about a quarter, suggesting that expanding output has been easier than converting it into profit.⁵ China CSSC leads listed peers in yard capacity, not margin. The question is whether it can narrow that gap while the state system around it continues to add capacity.

Yangzijiang Shipbuilding is an exception that requires qualification. Its 2025 operating margin was 31.3%, while net profit equalled 30% of revenue.⁵ No other large commercial yard reported comparable figures. Its focus on container ships and tankers may support a leaner operating model, but sizeable investment and financing income also contributed. Free-cash-flow margin fell from about 45% in 2024 to 9% in 2025 as customer deposits that had boosted earlier years unwound.⁵ The available data do not cleanly separate construction profit from investment income, so they do not establish Yangzijiang as the industry’s most profitable builder.

Korea: the prices of 2021 arrive

The Korean yards show the recovery most clearly. HD Korea Shipbuilding's operating margin rose from about 2% in 2022 to 16.5% in 2025, while HD Hyundai Heavy moved from a loss to 11.6%.⁵ Both improved further in 2026: in the June quarter, HD Korea Shipbuilding earned more than 22% and HD Hyundai Heavy more than 16%.⁵ Ships ordered at the higher prices of 2021 and 2022 were moving through the yards as cheaper legacy contracts were completed.

Hanwha Ocean and Samsung Heavy recovered from deeper losses. Hanwha Ocean's June-quarter revenue rose 68%, well above forecasts, and its margin reached 15%.⁵ About three-quarters of its order backlog was commercial, with naval and offshore work accounting for the rest, giving it exposure that Samsung Heavy lacks.⁵ Samsung Heavy's June-quarter operating margin was higher, at nearly 22%, but its 2025 net margin was below 5%, and it missed revenue forecasts in each of the preceding four quarters.⁵ That difference between operating and net profit warrants attention, since legacy costs or financing burdens may absorb much of the operating gain. For both yards, the test remains timely, profitable delivery of the contracts now reaching their accounts.

No Korean yard clearly leads on every measure. HD Korea Shipbuilding and Samsung Heavy were close on latest-quarter margin; Samsung Heavy led on 2025 return on capital; and the HD Hyundai group and Hanwha had broader exposure across vessel types and naval work. The evidence does not identify a single winner. It does indicate that the gap between Korean yards and most other commercial builders had widened.

Europe and Japan: capability without margin

Europe illustrates that technical capability does not ensure attractive returns. Fincantieri builds cruise ships and warships and has one of Western shipbuilding’s largest backlogs. Its 2025 orders were more than twice its revenue, yet operating margin was only 1.2%.⁵ Cruise ships are among the most complex vessels built, and their fixed-price contracts carry substantial execution risk. Meyer Werft, the German cruise specialist, required state support in 2024. Its 2025 accounts showed revenue of €2.83 billion and a loss after tax of about €384 million.⁵ Governments value that capacity for strategic and employment reasons, but those priorities have not ensured profitability. Damen, which builds tugs, ferries, patrol vessels and other specialised craft across many yards, earned a net margin of about 2%.⁵

Japan's listed yards are smaller and more specialised. Namura Shipbuilding, concentrated in bulk carriers and tankers, earned an operating margin of about 18% in its latest fiscal year despite little revenue growth. Oshima earned about 6.5%.⁵ Japan's largest builder, Imabari, is private, leaving its most significant competitor with limited public disclosure. Elsewhere, rebuilding capacity remains difficult: Taiwan's CSBC has been loss-making, Singapore's Seatrium returned to operating profit only in 2024, and India's Swan Defence and Heavy Industries is rebuilding a yard with only a year of meaningful revenue.⁵ Swan Defence $SWANDEF.NS is too new for its financial record to provide a reliable test.

The navies: a moat around a bottleneck

The naval contest began in a repair yard. In 1886, the railroad magnate Collis Potter Huntington, who had brought his Chesapeake and Ohio Railway to the Virginia coast, founded what became Newport News Shipbuilding and Drydock Company to repair and later build ships.²⁷ Over the following century, the yard specialised in some of the most demanding naval work. It is now the only builder of American nuclear aircraft carriers and builds nuclear submarines with General Dynamics' Electric Boat under Navy supervision.²⁹ In 2011, Newport News and the Ingalls yard in Mississippi were spun off together as Huntington Ingalls Industries $HII.²⁸

The history explains the barrier to entry. Building nuclear warships requires security clearances, specialised nuclear skills, facilities developed over decades and a relationship with a single customer that a newcomer cannot readily replicate. At the end of 2025, Huntington Ingalls had about $47.7 billion of shipbuilding backlog across its two yards, nearly four years of revenue, while General Dynamics $GD had $52.3 billion of backlog in its Marine Systems group.⁵ About 81% of Huntington Ingalls' revenue came from the US government.⁵

That backlog is not equivalent to cash. Huntington Ingalls' operating margin was 4.9% in 2025, below its level three years earlier, because the binding constraint was labour. Shortages of trained welders and engineers, immature designs, staged funding and schedule rework can delay the conversion of backlog into profit. The company exceeded revenue forecasts in each of the preceding four quarters, indicating improved production, but its margin also shows the limited pricing power available in a single-customer market.⁵

Outside the United States, the structure differs by country. BAE Systems $BA.L builds Britain's submarines and frigates within a much larger defence group. France's Naval Group and Spain's Navantia are state-owned, and Navantia's revenue grew 30% in 2025.⁵ Mitsubishi Heavy Industries $7011.T builds Japanese warships and submarines within a diversified industrial group, as does Kawasaki Heavy Industries $7012.T, which also builds LNG and gas carriers. IHI $7013.T supplies marine and defence machinery. Thyssenkrupp Marine Systems $TKMS.DE, the German submarine builder, was spun off from its parent and trades at about 66 times earnings on a 4.9% margin. Saab $SAAB-B.ST builds Sweden's submarines through its Kockums business, and RENK $R3NK.DE supplies naval gearboxes, alongside Rolls-Royce $RR.L, whose Power Systems business sells mtu marine engines and earns about 30% of its revenue from service.⁵ For most of these groups, disclosures do not isolate profit from naval shipbuilding.

India is a high-margin exception. Mazagon Dock $MAZDOCK.NS, which builds submarines and destroyers, earned an operating margin of about 17% in its latest fiscal year, and Garden Reach Shipbuilders grew revenue 38%.⁵ Both are state-controlled and trade at more than 30 times earnings. Australia's Austal, which builds aluminium warships in Australia and the United States, lost money.⁵ Across the naval layer, combined operating margin was 6.7% in the June 2026 quarter, while share prices fell 16.5% over the preceding year, suggesting that markets had already priced in much of the rearmament case.⁵

The score so far

As of September 2026, commercial execution was improving visibly, especially in Korea. The highest margins, however, remained concentrated in licensing, specialised equipment and a few disciplined yards rather than the average hull builder. Naval qualification creates a substantial barrier to entry, but workforce shortages and single-customer pricing still constrain its returns.

This boom may last longer than the last one, but its profits can still shift between layers as it develops.

↑ Back to Top

The myths that decide who gets paid

Picture an owner whose 15-year-old tanker is due for its next major survey. It can order a conventional replacement for 2029 delivery; spend a few million dollars in dry dock to extend the old vessel’s life; pay more for a dual-fuel design and bet on tighter fuel rules; or wait for a clearer fuel winner. That decision determines who is paid: the yard, engine maker, repair dock or owner that preserves cash.

"The orderbook proves the yard will prosper"

The argument is intuitive. Full orderbooks through 2029 make revenue visible for years. But the 2008–16 cycle showed that visible revenue can still be unprofitable when contracts are underpriced or poorly executed.

The optimistic case is that scarce slots, limited skilled labour, energy-security concerns, naval demand and fuel rules will sustain ordering. Prices could then remain high enough for 2026–30 deliveries to earn healthy margins, as recent Korean results suggest. The opposing case is that Chinese capacity expands, trade slows, freight rates weaken and fuel uncertainty delays orders. Yards may then cut prices to fill 2029 and 2030 slots before completing today’s backlog.

Markets appear to be weighing both outcomes. Listed commercial-yard shares gained 114% over three years but fell 2% in the preceding 12 months, even as revenue growth reached its fastest pace of the cycle.⁵ Analysts expect revenue to grow about 17% in the next fiscal year, in line with the annual growth achieved over 2020–25.⁵ An orderbook shows that work has been promised; its margin is established only when the ship is delivered.

"China wins everything because it has the most capacity"

China’s industrial scale is substantial, and it already leads on volume. Yet complex LNG carriers, cruise ships, naval vessels and some engine and automation systems rely on qualifications, supplier networks and skilled labour developed over decades. Owners may pay more for Korean LNG carriers because they place value on delivery execution and containment expertise, while navies cannot readily source warships from a strategic rival.

The reverse assumption is also unsafe. Korea, Japan and Europe cannot treat their capabilities as permanent. China has built LNG carriers and cruise ships, and UNCTAD’s finding that it is narrowing the technology gap describes an ongoing trend.¹⁵ The industry’s historical pattern—starting with simpler vessels and advancing into more complex work—favours China over time. The claim is overstated for today but more plausible over the next decade. The decisive evidence will be China’s share of complex gas-carrier and dual-fuel orders, and the prices at which its yards win them.

"A dual-fuel order is a zero-emission order"

A dual-fuel order is a hedge: it purchases the option to use a cleaner fuel, not the fuel itself. An LNG dual-fuel vessel operating on fossil LNG still emits carbon, while a methanol-capable ship using conventional fuel has emissions comparable with a conventional vessel.

Four conditions will determine whether owners use the option: fuel availability at major bunkering ports, relative fuel prices, safety approval for fuels such as ammonia at scale, and whether charterers and the IMO fuel standard reward cleaner operation sufficiently to cover the added cost. Until then, dual-fuel engine and fuel-system suppliers earn from building the option. Businesses dependent on sustained use of alternative fuels, including some service providers, must wait.

"Shipowners are the cleanest way to own shipbuilding"

The logic is that owners create demand and therefore offer exposure to the boom. But they are the yards’ customers. Their profits depend on freight and charter rates, fuel costs and vessel values; new ships are a capital cost, not a source of shipbuilding margin. The customer base includes container lines Maersk, 中远海运控股 COSCO Shipping Holdings $601919.SS, Hapag-Lloyd $HLAG.DE, Evergreen Marine $2603.TW, Yang Ming $2609.TW, HMM $011200.KS and ZIM. It also includes the diversified Japanese owners Mitsui O.S.K. Lines $9104.T, NYK $9101.T and K Line $9107.T; the Chinese energy fleets China Merchants Energy Shipping $601872.SS and COSCO Shipping Energy Transportation $600026.SS; and tanker companies Frontline, DHT $DHT, International Seaways $INSW and Scorpio Tankers $STNG.

The preceding year showed how sharply owner and builder returns can diverge. Tanker revenue roughly doubled in the June quarter as oil prices rose, and owner shares gained 45% over 12 months while yard shares declined.⁵ Container lines, by contrast, earned far less than in 2022. Owners are also funding the boom: capital spending rose to about 11% of revenue, compared with a usual 8%.⁵

Empor’s tests found that owner operating margins generally rose with oil prices, contrary to what fuel costs alone would imply. The likely explanation is that higher oil prices coincided with strong tanker demand and freight rates. DHT and COSCO Shipping Energy, whose margins behaved more as fuel costs would suggest, were exceptions.⁵ Owning shipowners means accepting freight-rate and asset-value risk. It is a different business from shipbuilding, and it can perform well or badly while yards move in the opposite direction.

Where the money could move next

If alternative-fuel orders increase, more value may flow to engine and fuel-system suppliers and their service businesses. If owners defer newbuildings and extend older ships’ lives, retrofit and repair docks may benefit. If governments prioritise readiness over new platforms, naval sustainment may gain. And if low-cost capacity weakens yard pricing, owners may benefit by buying ships more cheaply. Each outcome should become visible in a small set of early indicators.

↑ Back to Top

The few signs that will settle the argument

Before a yard records revenue from a ship, someone has chosen a fuel, reserved an engine slot, agreed a contract price and planned future dry-dock work. Revenue reflects those decisions years later. The more useful signals come earlier.

New orders and what they cost

The first is global newbuilding orders, measured in compensated gross tonnes, alongside contract prices. Compensated gross tonnes adjust for construction complexity: a cottage and a hospital may have similar floor area, but not similar labour requirements. Orders lead yard revenue by years, while prices indicate whether slots remain scarce.

Clarksons reported 58m compensated gross tonnes ordered in 2025, worth about $186 billion and roughly 30% above the ten-year average, following 20m in 2020 and 48m in 2021.²⁶ High ordering at firm prices through 2026 would support the case for a sustained replacement cycle. A prolonged decline in both would suggest a more conventional peak.

The share of ships built for new fuels

The second is the share of ordered tonnage capable of using alternative fuels. That measure shows whether regulation is changing ship specifications—the basis of the equipment suppliers’ case—or merely encouraging owners to wait.

Clarksons estimated that about one-third of 2025 orders could use alternative fuels, led by LNG dual-fuel vessels.²⁶ A rising share across vessel types as IMO rules become clearer would support the transition case. A decline after the rules take effect would suggest that uncertainty is deferring demand rather than bringing it forward.

Slots and skilled hands

The third is how far ahead capable yards are booked, alongside subcontracted-labour costs, particularly in Korea. A dock or crane is not usable capacity without welders, engineers, suppliers and, for naval work, security-cleared workers. Delivery dates tend to move before reported margins because owners reserve slots in advance.

There is no single global measure. UNCTAD records Korea’s labour constraints, while yards discuss delivery slots in quarterly results.¹⁵ Long delivery dates and firm prices would support the scarcity case. If slots open and labour costs ease at the same time, the case for sustained margins weakens.

Orders reaching the suppliers

The fourth is order intake and lead times at equipment suppliers, including engine, containment, automation and retrofit makers. This indicates whether yard orders are reaching the suppliers that often earn higher margins, usually several months after the yard contract is signed.

Disclosure is limited. Most suppliers report group-level quarterly figures, and marine specialists in Empor’s dataset do not disclose comparable marine order intake. GTT’s €1.9 billion backlog at June 2026 is the clearest published measure.⁵ Rising supplier orders ahead of revenue would support the bottleneck argument. No broad pickup within several quarters of strong yard ordering would weaken it.

Funded warships and milestones met

The fifth is funded naval backlog and progress against programme milestones. Appropriated money and completed milestones distinguish demand that can turn into revenue from political ambition.

Huntington Ingalls and General Dynamics report backlog in quarterly and annual filings. Their year-end 2025 figures were discussed earlier, and Huntington Ingalls was scheduled to report next on 29 October 2026.⁵ Backlog converted steadily into revenue at stable or improving margins would support the naval case. Repeated schedule rebaselines, unfunded awards or labour-constrained margins would weaken it.

The answer

Profit is least secure in the standard hull, where yards carry fixed-price risk, large workforces and input costs they cannot fully control. It is more defensible where a company controls a hard-to-replace qualification, a scarce component, recurring service work, or a yard slot priced and delivered with discipline.

GTT’s membrane licences, engine designers’ service relationships, HD Hyundai Marine Solution’s parts business, Korean yards’ recent contracts and nuclear naval-yard qualifications are current examples. Shipbuilding’s history offers the necessary warning: each advantage must withstand the next expansion of capacity, as Europe’s and Japan’s positions ultimately did not.

↑ Back to Top

Glossary

• Classification society — An independent technical body that writes rules and surveys ships, helping them obtain insurance, finance and access to trade.
• Compensated gross tonnes — A measure of shipyard workload that adjusts a vessel’s size for construction complexity.
• Dual-fuel — An engine designed to use conventional marine fuel as well as an alternative such as LNG or methanol.
• EEXI — Energy Efficiency Existing Ship Index, a design-efficiency standard for ships already in service.
• CII — Carbon Intensity Indicator, an annual rating of a ship’s carbon efficiency in operation.
• LNG carrier — A ship designed to carry liquefied natural gas at about minus 163°C.
• Membrane containment — A thin metal cargo barrier and insulation system built within an LNG carrier’s hull; the hull provides the structural support.
• Orderbook — Contracted future work, which does not by itself indicate its profitability.
• Retrofit — A substantial upgrade to an existing ship, such as a new fuel system or efficiency package.
• Dry dock — A facility that can be drained to allow a ship to be repaired, overhauled or converted out of the water.
• Newbuilding — Construction of a new ship, rather than its repair, conversion or operation.
• Naval sustainment — Long-term maintenance, refit and support for military ships.

References

1. Titanic and the SOLAS Convention — International Maritime Organization ↩

2. International Convention for the Safety of Life at Sea (SOLAS) — International Maritime Organization ↩

3. Our history — DNV ↩↩

4. Maritime — DNV ↩

5. Ship Building theme tables: scorecard, trends, links, pulse and consensus, from company filings and market data via Financial Modeling Prep, 25 September 2026 — Empor ↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩↩

6. How to find us, including company history — MAN Energy Solutions ↩

7. Explore our history — A.P. Moller - Maersk ↩↩

8. History — GTT ↩↩↩↩↩↩

9. International offering memorandum — GTT ↩

10. History — HD Hyundai Heavy Industries ↩

11. Company overview and historical record — Hyundai Heavy Industries ↩↩

12. Group history — China State Shipbuilding Corporation ↩↩

13. Review of Maritime Transport 2025 — UNCTAD, 2025 ↩

14. UNCTAD Data Hub: shipbuilding and deliveries — UNCTAD ↩

15. Review of Maritime Transport 2025, chapter 2 — UNCTAD, 2025 ↩↩↩↩↩

16. Global crisis slowed growth of world seaborne trade; maritime freight rates still low — UNCTAD ↩

17. Review of Maritime Transport 2016 — UNCTAD, 2016 ↩↩

18. Seaborne shipping grows at slowest pace since 2009, future remains uncertain — UNCTAD ↩

19. Resilient maritime logistics guidebook: economic and financial risks — UNCTAD ↩

20. IMO 2020: cutting sulphur oxide emissions — International Maritime Organization ↩

21. International Convention for the Prevention of Pollution from Ships (MARPOL) — International Maritime Organization ↩

22. Historic background: prevention of air pollution from ships — International Maritime Organization ↩↩

23. IMO sets 2020 date for ships to comply with low sulphur fuel oil requirement — International Maritime Organization, October 2016 ↩

24. Marine Environment Protection Committee, 83rd session — International Maritime Organization, April 2025 ↩

25. IMO approves net-zero regulations for global shipping — International Maritime Organization, April 2025 ↩

26. 2025 preliminary results — Clarkson PLC ↩↩↩

27. Our history — Huntington Ingalls Industries ↩

28. Newport News shipyard timeline — City of Newport News ↩

29. Supervisor of Shipbuilding, Conversion and Repair, Newport News — US Navy, NAVSEA ↩