Kure Services Co., Ltd., formerly known as Kanda Shipbuilding Co., Ltd., received a special liquidation order from the Tokyo District Court on August 5th. This move marks the end of an era for a company that has been a significant player in Japan's shipbuilding industry since its founding in 1937.

 

The company, which was once a thriving steel ship manufacturer and repairer based in Kure City, Hiroshima Prefecture, experienced significant growth, reaching annual sales of approximately ¥36.1 billion in 2011. At its peak, Kure Services built around seven ships per year, a testament to its capabilities and reputation in the industry.

 

However, the shipbuilding industry has undergone drastic changes in recent decades. The rise of global competition, particularly from South Korea and China, led to intense price wars and shifts in global demand for new ships. These challenges hit Kure Services hard, leading to substantial financial losses between 2014 and 2015, pushing the company into insolvency.

 

Despite attempts to recover with the support of financial institutions, the impact of the COVID-19 pandemic and escalating competition forced Kure Services to withdraw from the new shipbuilding business. By 2022, the company’s sales had plummeted to around ¥6.6 billion, a stark contrast to its earlier success. In April 2022, the company transferred its ship repair business to a newly established entity, Kanda Dock Co., Ltd., and a resolution for dissolution was passed in April 2024, leading to the current liquidation proceedings.

 

The total liabilities of Kure Services stand at approximately ¥10.95 billion, with a capital of ¥65 million. The special liquidation process, which is one of the procedures available exclusively to corporations, is being conducted under the supervision of the court. This process is often used in cases where a company, due to insolvency or other significant challenges, cannot continue its operations through regular means.

 

The situation with Kure Services is emblematic of the broader challenges faced by the Japanese shipbuilding industry. Once a dominant force globally, holding over 50% of the world market share at its peak, Japan's shipbuilding industry has seen its share diminish as South Korean and Chinese shipbuilders have risen to prominence. Today, Japan ranks third globally, behind South Korea and China, with a world market share of around 15.2%.

 

The competitive landscape has intensified as major shipbuilders in South Korea and China have consolidated, creating massive conglomerates that dominate the market. For example, South Korea's Hyundai Heavy Industries acquired Daewoo Shipbuilding & Marine Engineering, forming a group that controls a significant portion of the global shipbuilding capacity.

 

In response, Japanese shipbuilders have been undergoing restructuring and consolidation. Imabari Shipbuilding, the largest in Japan and ranked fourth globally, has expanded through a series of mergers and acquisitions, positioning itself as a formidable competitor despite the challenging market conditions.

 

While companies like Imabari Shipbuilding have pursued aggressive growth strategies, others have focused on diversification and specialization. For instance, Mitsubishi Heavy Industries has shifted its focus towards engineering and technology-driven sectors, while also collaborating with other shipbuilders to remain competitive.

 

The story of Kure Services serves as a poignant reminder of the shifting dynamics in the global shipbuilding industry. As market conditions continue to evolve, companies must adapt to survive. For potential investors, the liquidation of Kure Services presents an opportunity to acquire valuable assets and expertise in an industry that, while challenging, remains critical to global trade and economic stability.

 

Interested?

 

 

While the liquidation of Kure Services marks the end of an era, it also opens the door for new opportunities. The company’s long history and technical expertise in shipbuilding and repair could be leveraged by a forward-thinking investor to build a resilient and competitive business in the global market.

 

Source: Nikkei news