Mitsui E S announces plans to exit commercial shipbuilding

Mitsui E&S is the leading two-stroke engine manufacturer in Japan, with a market share of over 50% of diesel engines. (Courtesy of Mitsui E&S) Mitsui E&S is the leading two-stroke engine manufacturer in Japan, with a market share of over 50% of diesel engines. (Courtesy of Mitsui E&S)

Japanese diversified engineering firm Mitsui E&S announced plans on Monday 11 November to reorient the business away from commercial shipbuilding and to focus on engine manufacturing as a core activity.

The company had announced a turnaround plan earlier in 2019, but released a revised strategy after announcing further writedowns on 1 November.

The company is planning to refocus its activities on profitable activities in its manufacturing business. "We will focus on the development of related equipment and services targeting the oil, gas, and machinery businesses by positioning the machinery business and marine business as our focus business," the company stated in its strategy update on Monday.

The company also alluded to plans to extend the product line-up of its machinery business, with a focus on product lines expected to demonstrate future profitability. Further details will be released when the company's medium-term plan is finalised.

The company is an important engine manufacturer and licensee, and has had a license agreement with MAN ES' predecessor Burmeister & Wain since 1926. The company has advanced dual-fuel engine research capabilities, and recently cooperated in the testing of emulsified fuels for MAN's ME-LGIM engine on its 4S50ME-T test engine at Tamano.

The company confirmed that it was planning to divest its commercial shipbuilding business, and would sell and leaseback the Chiba shipyard to raise capital. The group’s Chiba shipyard has two dry docks that have been in operation since 1962

It is unclear how attractive a standalone shipbuilding unit without a dedicated yard will prove: attempts to merge Mitsui E&S with Kawasaki Heavy Industries faltered in 2013, and observers note that the pace of consolidation in the domestic Japanese market has been slower than in other shipbuilding centres globally.

The company had issued a denial in June 2019 after a report by Nikkei Asian Review that it planned to cease accepting new orders for commercial vessels after 2019, and would subsequently collaborate closely with Tsuneishi.

Capital constraints were also leading to the group exiting the biomass electricity and wind power construction businesses.

Mitsui E&S may continue to produce naval vessels. The group is an important defence contractor in Japan, where it is one of three shipyards supplying Japan’s Self-Defence Force with vessels, along with Japan Marine United and Mitsubishi Heavy Industries.

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