Historic Japanese shipbuilding company Sumitomo Heavy Industries Marine & Engineering (SHIME) is pulling out of the shipbuilding industry after more than 125 years, citing a “deteriorating environment” for the business amid rising material costs and volatile ship prices. 

SHIME, which mainly focussed on producing mid-size Aframax tankers, said that it will stop taking orders for new vessels from FY2024 and will exit the shipbuilding business once it has fulfilled its current backlog at its shipyard in Yokosuka. 

The company was spun off as a subsidiary of its parent company Sumitomo Heavy Industries (SHI) in 2003 but can trace its origins back to the establishment of Uraga Senkyo Corporation in 1897 and has marked achievements such as the construction of the longest self-propelled ship ever built, the Seawise Giant, in 1979. 

A notice from SHI reporting the decision to pull out of the industry highlighted the financial crash of 2008 and the bankruptcy of investment bank Lehman Brothers as one of the factors contributing to the “deteriorating environment for the shipbuilding business.” 

It continued: “The company 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, we have extensively deliberated on the future of the shipbuilding business together with SHIME.” 

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The company’s Yokosuka shipyard is expected to be the site of a new factory for SHI’s Sumitomo Contruction Machinery subsidiary producing some models of hydraulic excavators once shipbuilding has ceased there. 

Though Japan was recently the biggest shipbuilding country in the world, many of its biggest companies have faced increased pressure from competition overseas, with countries such China and South Korea offering lower prices, leading to a decline in the country’s once dominating presence in the industry. 

Data from the Observatory of Economic Complexity reports that Japan’s share of ship exports has reduced to 13.8%, significantly behind China at 20.4% and South Korea at 24%, though still third biggest in the world as of 2021. 

Japan is not the only historic shipbuilding nation to have seen a decline in exports in recent decade, with the Netherlands government investing €60m into “innovative shipbuilding” in the country in 2023 after noting a drop in domestic shipbuilding from 45% in 1980 to just 4% in 2023.