This chapter provides a comprehensive overview of the Philippine shipbuilding and repair sector. It includes an assessment of ship production, ship repair, and retrofitting activities, with detailed insights into the types of shipyards, the nature of operations, and evolving industry trends. It also explores trade volumes related to marine equipment imports and exports, as well as current ship recycling activity, including the number and distribution of ship recyclers. The ageing profile of the domestic fleet and its implications for ship repair, replacement and recycling demand is also discussed.
Peer Review of the Philippines’ Shipbuilding Industry
Abstract
Ship production in the Philippines has declined significantly since its peak in the 2010s. Following a surge in output during the early 2010s, ship completions dropped sharply after 2018. The closure of Hanjin’s Subic shipyard in 2019 was a key turning point, resulting in a 53% decline in completions—from 873 141 CGT in 2018 to 406 486 CGT in 2019. This event highlighted the industry’s dependence on large foreign-owned facilities.
The industry remains heavily export-oriented and dominated by foreign-owned shipyards. Between 2000 and 2024, 96% of ship deliveries (measured in CGT) were for export markets, with 99% of these vessels produced by foreign-owned shipyards. Export output is primarily focused on bulk carriers (65%), container ships (26%), and tankers (5%).
Domestic shipyards are largely focused on ship repair and smaller vessel types. Local yards, particularly those not under foreign ownership, cater mainly to domestic needs, building a broader mix of vessel types. These include product tankers (39%), fish carriers (15%), and fishing vessels (10%). The fishing sector alone accounts for 37% of domestic shipbuilding demand, underscoring its relevance to local production.
The relocation of shipyards may disrupt production capacity and raise environmental concerns. The planned relocation of MRO-VII yards is expected to affect the production of an estimated 400–600 ships per year. Shallow draft conditions and environmental sensitivities at new sites may further constrain output and reduce operational efficiency, with implications for future production trends.
The production of ships (measured in Compensated Gross Tonnage – CGT) at Philippine shipyards strongly increased in the 2010s (Figure 3.1) and then dropped significantly. A decrease by more than half from 873 141 in 2018 to 406 486 in 2019 in terms of ship completions in CGT can be observed, reflecting the impact of the bankruptcy and closure of Hanjin Subic shipyard (HHIC – Phil) which represents the largest bankruptcy in the Philippines’ history.
Source: Data from (Clarksons World Fleet Register, 2024[1]) and (S&P, 2024[2])
Shipbuilding in the Philippines is dominated by foreign-owned yards which primarily direct their production toward export. Table 3.1. shows the cross table of ownership (domestic or foreign) and market orientation (export or domestic) of ship production in the Philippines. From 2000 up to 2024, exports represented 96% of ship deliveries in terms of CGT, and 99% of this production was made by foreign-owned shipyards.
Philippine shipyards have been producing a diversity of vessel types, both for the domestic and export market. For export, the primary focus is on bulkers and fully cellular container ships, respectively representing 65% and 26% of shipbuilding completions and orders (in CGT) between 2010 and 2028, followed by tankers (5%). For the domestic market, Philippine shipyards produced a more diverse range of vessels, with notably product tankers (39%), fish carriers (15%), and fish vessels (10%). The fishing sector constitutes a large part of the shipbuilding demand for domestic production, 37% in total with fishing patrol vessel, fishing support vessel fish carrier and fishing vessels.
In Compensated Gross Tonnage (CGT)
Source: Data from (Clarksons World Fleet Register, 2024[1])
3.1.1. Shipbuilding capacity
To estimate the capacity of the shipbuilding industry in the Philippines the “maximum production” approach is employed. This approach, at the yard level, takes the maximum production of a given shipyard for the x past years to evaluate the installed capacity. This calculation is done for the past 3 and 15 years, to have both a medium and more long approach to capacity.
Under the medium-term capacity approach, based on the 3-year maximum production, the Philippines reached its peak capacity in 2016 at 1 000 000 CGT. A significant decline followed, stabilising around 400 000 CGT by 2020. Figure 3.3 compares capacity using this approach to actual deliveries. Until 2013, the data shows undercapacity, reflecting the early stages of the Philippines’ shipbuilding development despite receiving a large number of orders. After peaking in 2016, consistent overcapacity is observed, except in 2023. Notable overcapacity periods include a substantial spike from 2019 to 2020 due to the bankruptcy of the Hanjin shipyard, followed by a smaller but persistent overcapacity thereafter.
The 15-year maximum production approach presents a different trend. Table 3.4 highlights a sharp increase in shipbuilding capacity during the early 2010s, stabilising at approximately 1 200 000 CGT from 2015 to 2026 before a decline begins. The Philippines operated near full capacity until 2011, even exceeding capacity that year. Since 2011, however, the country has faced significant undercapacity, which has been particularly pronounced since 2019.
3.1.2. Shipyards
Most shipyards in the Philippines are Class C (97 out of 123) which entails that they are capable of building and repairing ships with a maximum length of 80 meters. Production since the 2000s, in terms of CGT, has been dominated by 2 shipyards, Tsuneishi Cebu and Hanjin Heavy Industries & Construction Philippines (HHIC – Phil) until the latter’s bankruptcy in 2019. Together they represent 96% of the production in terms of CGT between 2000 and 2024. The rest of the top builders consist of Austal Philippines and FBMA Marine, that the former acquired in 2011, and then Josepha Slipways and Herma Shipyard Inc.
Out of the 10 biggest shipyards in the Philippines, 95% are primarily engaged in ship repair activities of domestic ships, 50% are engaged in shipbuilding activities for local market and 5% in export market. The largest shipyards, Class A, account for most of the production in terms of GT (Gross Tonnage), especially for exports. According to Clarksons, Tsuneishi Cebu accounted in 2023 for 790 002 GT, making it by far the largest active shipyard in the country. In 2023, Austal Philippines was also active, producing 13 488 GT (Clarksons World Fleet Register, 2024[1]).
SBSR yards are concentrated in three regional clusters with the most significant amount near the Marina central office (NCR) and Region III in the North with most Class A and Class C shipyards, followed by the General Santos (MRO XII) and Cebu (MRO VII) regions – in the South and the centre of the Philippines with a majority of Class C shipyards.
Some challenges include the fact that 70% of shipyards rely on slipways, primarily for repair and dry-docking of small vessels like passenger and fishing boats. Advanced facilities such as synchro lifts, graving docks, and floating docks are largely limited to Class A and B shipyards. Moreover, a vast majority of domestically owned shipyards rely on outdated facilities, about 66% of the 186 shipyards facilities in the country require rehabilitation. Significant reliance on imported materials like marine-grade steel and machinery, as well as the lack of ancillary industries reduce local value addition.
3.1.3. Foreign investments
Foreign ownership in the Philippine shipbuilding and ship repair (SBSR) industry has been a significant aspect of its growth, bringing in investments, technology transfer, and global market access. The sector benefits from liberal government policies and foreign investors are allowed to own up to 100% of a business involved in shipbuilding and ship repair under certain conditions. Moreover, government incentives for export-focused ship construction, notably the tax exemptions in Cebu’s Economic Zone zone, reinforce the attractiveness of the sector for international stakeholders. This permitted country to maintain 4th largest shipbuilding country status country worldwide after China, Korea and Japan.
Foreign companies like Seatrium, Tsuneishi, and Austal Philippines Pty. Ltd. have joint ventures with local firms and bring advanced technologies, while also facing challenges from global economic conditions. Challenges include competition with foreign-owned shipyards and the need for regulatory support. These foreign owned shipyards represent the largest part of the domestic production in terms of CGT, more than 99% since 2000.
A new company, Hyundai Heavy industries is entering the shipbuilding market in the Philippines. The company, along with the private equity firm Cerberus Capital Management acquired in April 2022 the Agila Subic Shipyard, the site of HHIC – Phil until the shipyard went to bankruptcy in 2019. Hyundai Heavy Industries is expected to invest USD 550 million in the shipyard in the next 10 years. It will update the facility for the manufacture of offshore wind power substructures and the expansion of its maintenance, repair and overhaul (MRO) business.
Ship repair remains the dominant activity in Philippine shipyards, despite a recent decline in afloat repair work. As of 2023, the country had 112 accredited afloat ship repair entities, 167 boatbuilders (Class A and B) also performing repairs, and 13 shipbreakers and recyclers. While 95% of shipyards focus on domestic repair, afloat ship repair activities declined by 11.11% from 2022 to 2023. Nevertheless, overall repair activity has rebounded since the COVID-19 downturn, with over 200 recorded activities in 2023—twice the number in 2016.
Domestic-owned shipyards conduct a large share of repairs, while foreign-owned yards lead in retrofitting. Domestic yards account for nearly 40% of total repairs by CGT, but 58% when measured by the number of repair activities. In contrast, foreign-owned facilities dominate in retrofitting work, particularly installations of energy-saving technologies and environmental equipment. Demand is driven by both domestic and international clients, with the market split approximately 60% domestic and 40% foreign.
The Philippines is becoming a regional hub for cost-effective ship repair and retrofitting. The country’s strategic location in Southeast Asia and relatively low costs have contributed to growing foreign demand, especially from Viet Nam, China, and Japan. Philippine yards now handle 64% of domestic and 53% of foreign repair requests, reflecting increasing trust in local capabilities for both standard repairs and complex retrofits.
Vessel conversion is becoming increasingly important for ship repair companies in the Philippines. In places like Cavite, Manila, Navotas, Batangas, Cebu, Subic Bay and Davao, vessels are being repurposed by a skilled workforce with the aim of ensuring cost-effectiveness (Amaya, 2023[4]). With its strategic location in Southeast Asia and its historic maritime tradition, the Philippines can offer a unique hub for ship conversion, repair and retrofit activities. Figure 3.5 shows the evolution of ship repair activities in the Philippines by year. The Philippines increased the number of repair activities from 2016 up to the start of the COVID-19 pandemic when it decreased significantly. Since then, ship repair activities have increased, to reach more than 200 in 2023, a two-fold increase from 2016.
Source: Data from (Clarksons World Fleet Register, 2024[1])
A total of 112 accredited afloat ship repair entities, in addition to 167 boatbuilders from class A and B also active in the repair segment, and 13 shipbreakers and recyclers from class A and B. In the Philippines 95% of shipyards are primarily engaged in ship repairing activities of domestic vessels. As of 2023, afloat ship repairs decreased by 11.11% when compared to 2022.
While foreign owned shipyards account for the largest part of the shipbuilding production, this is not the case for ship repair. Domestic owned yards accounted for nearly 40% of the ship repair industry when looking in terms of CGT between 2016 and 2024, notably driven by Seafront and Herma shipyards representing respectively 28% and 7%. When looking at the ship repair industry in terms of number of ship completions, domestic owned shipyards make up a greater share, represent 58% of the ship repair industry.
Source: Data from (Clarksons World Fleet Register, 2024[1]).
The ship repair industry in the Philippines consists largely of repair yard calling, as Figure 3.7 illustrates. But since 2021, Filipino repair yards have also started engaging in retrofitting, notably with the upgrading of Energy Saving Technologies (EST) and of environmental equipment. These retrofitting activities are largely performed by foreign owned shipyards. Foreign owned shipyards represent 64% of EST equipment upgrading and are the only one to perform environmental equipment upgrading.
Source: Data from (Clarksons World Fleet Register, 2024[1])
The ship repair industry is driven by both foreign and domestic demand, representing respectively 40% and 60% of the market for ship repair. Domestic repair yards dominate the industry, they represent 64% of the repair activities for Philippine companies, and 53% of foreign ones.
The demand for ship repairs at yards in the Philippines from foreign companies is primarily concentrated in East Asia, with significant demand from Viet Nam, Japan, and China, accounting for 127, 109, and 83 repairs, respectively, between 2016 and 2024. However, as shown in Figure 3.8, Filipino yards also attract shipowners outside of Asia, with Greece and Türkiye ranking 5th and 6th in terms of ship repair demand for Philippine yards.
Source: Data from (Clarksons World Fleet Register, 2024[1])
The Philippines ship repair market is growing (Figure 3.9), with this increase being notably driven by an increase in repair demand from Viet Nam, China, and Japan. From 2016, activities in ship repair and retrofits for these three countries grew from to 31 for Viet Nam, 21 for China, and 17 for Japan in 2024. This increase is part of a larger trend of growing demand from large shipbuilding and operating countries for ship repair in the Philippines.
Source: Data from (Clarksons World Fleet Register, 2024[1])
The Philippine marine equipment industry is underdeveloped and heavily reliant on imports. There is currently no significant presence of independent domestic manufacturers. Most local companies act as subsidiaries of international firms or serve as distributors for imported equipment, rather than producing it themselves.
Lack of local production capabilities limits the growth of the shipbuilding sector. Essential components such as propulsion engines, turbines, and energy systems are not manufactured domestically, hindering the development of a self-sufficient and competitive shipbuilding industry. This reliance also creates vulnerabilities in supply chain stability and cost-efficiency.
The marine equipment industry in the Philippines remains underdeveloped, with minimal domestic presence. Companies operating within this sector in the Philippines are predominantly subsidiaries of international manufacturers or distributors of imported equipment. These firms supply critical components such as marine engines, propulsion systems, and energy management systems, but they do not engage in domestic production.
Trade data from the World Bank underscores this reliance on imports. For selected marine equipment specific to shipbuilding— such as marine propulsion engines, propellers, and turbines— the Philippines demonstrates a significant imbalance, with imports vastly exceeding exports throughout the observed period. The sole exception is in propellers and blades, where the export is predominant (Table 3.7). This trend highlights the dependency of the Philippine shipbuilding industry on foreign manufacturers for essential marine equipment, reinforcing the status of local entities as intermediaries rather than producers. This reliance on imports presents a challenge for the Philippines in strengthening its shipbuilding and repair industry, as the lack of a robust domestic supply chains limits the sector’s capacity to achieve greater self-sufficiency and cost-efficiency. The shipbuilding and repair industry offers a strategic opportunity to attract investments. Establishing local production facilities or encouraging international manufacturers to expand their operations in the Philippines could reduce import dependence and strengthen the sector.
Source: (World Bank, 2024[6])
The Philippines well-positioned for ship recycling, with growing regional activity. Located near major international trade routes, the Philippines offers strategic advantages for shipbreaking. In 2023, the number of registered ship recyclers rose to 13—an 8.33% increase from the previous year. Cebu, in particular, saw its shipbreaking yards double between 2022 and 2023, indicating regional growth. Meanwhile, activity in the National Capital Region and Region III declined.
Despite its potential, ship recycling activity remains limited and domestically focused. Between 2015 and 2023, only eight vessels were scrapped in the Philippines, totalling 33 098 gross tonnage (GT). All were Philippine-flagged and served domestic operations, suggesting that the sector has yet to tap into international demand or expand its capacity significantly.
The country is aligning with international ship recycling standards and aims to ratify the Hong Kong Convention. Although the Philippines has not yet ratified the Hong Kong Convention, it follows international environmental and safety guidelines for ship recycling. Accession is targeted for 2025. Shipowners are required to prepare a Ship Recycling Plan (SRP) prior to dismantling, ensuring proper handling of hazardous materials and safe operations.
An aging domestic fleet signals a growing need for recycling services. Ship recycling demand is closely tied to vessel age and market conditions. While the global scrapping age ranges between 25 and 35 years, the median age of the Philippine fleet is 33.5 years, with many vessels operating beyond 50 years. This aging profile raises safety and regulatory concerns.
The outdated passenger fleet may drive future demand for domestic shipbreaking. Passenger vessels, especially ferries, are particularly old, with a median age of 41.48 years. As these vessels near the end of their operational life and face stricter safety regulations, the need for scrapping and fleet renewal is expected to rise—creating new opportunities for ship recycling in the Philippines.
The Philippines’ proximity to major maritime trade routes makes it an attractive hub for shipbreaking activities. A total of 13 ship recycler and breaker operating in 2023 were identified in the Philippines, from Class A & B, and increase of 8.33% from 2022. Between 2022 and 2023, the number of shipbreaking yards operating in Cebu has doubled, going from 2 to 4, while it has decreased from 8 to 7 in NCR & Region III.
Figure 3.11 shows the shipbreaking activities in the Philippines between 2015 and 2023. Over this period, 8 vessels were scrapped in Philippine yards, for a total of 33 098 GT. These vessels were all operated by Philippine companies and sailing under a Philippine flag. Hence, shipbreaking activity in the Philippines from 2015 to 2023 mainly answered domestic demand and was not positioned on the global market. Of the 8 vessels, 4 were passenger Ro/Ro, and 4 were general cargo.
The Philippines has not yet ratified the Hong Kong International Convention of recycling of ships, but has issued policy aligned with the international standards for safe and environmentally sound recycling. This convention will only come into force in June 2025 (International Maritime Organization, 2024[8]). Under these regulations, all shipowners must prior to initiating shipbreaking activities prepare a ship recycling plan (SRP) with an approved ship recycling facility (SRF) (IMO, 2011[9]). The SRP developed for each ship to be recycled outlines how the ship is going to be dismantled and disposed of or recycled, given its particularities and its inventory. Additionally, resolution MEPC.210(63) of the above-mentioned convention establishes criteria for the proper training of workers on the management of hazardous waste and creates strict safety standards (IMO, 2012[10]). The Philippines targets the accession to the Convention by 2025.
Source: NGO Shipbreaking Platform (2024)
Demand for ship recycling by domestic and foreign operators depends largely on the age structure of their fleet. Ship owners decide on three actions based on the calculation of the net present value of the ship: 1) continuing operating the vessels; 2) selling it on the secondary-hand market; or 3) selling it for scrap (Gourdon, 2019[11]). This decision is based on several factors, the age and other related characteristics of the ship, the freight rate conditions, and trade patterns such as operational developments. Between 2000 and 2017, the global median scrapping age ranged from 25 to 35 years old across ship types (Gourdon, 2019[11]).
In the Philippines, the median age of the fleet operated by companies registered in the Philippines is 33.5 years, and the age structure follows a bimodal distribution with two clear peaks, one for vessels around 10 years old (Figure 3.12) and the other for vessels between 35 and 50 years old. This aging fleet distribution may pose significant safety risks, as vessels approaching or exceeding their typical operational lifespan of 20 to 30 years may face increased maintenance challenges, reliability issues, and higher likelihoods of mechanical failures.
Note: This graph combines sea-going vessel from below 100 GT from S&P Global, with Clarksons World Fleet Register for sea-going vessel above 100 GT.
Source: OECD calculations based on Clarksons Research Services Limited (February 2025), https://www.clarksons.net/wfr; and S&P Global (February 2025), https://www.spglobal.com/market-intelligence/en/industries/maritime.
The age structure of passenger carrying vessels presents greater concerns, as older ships might not meet regulatory standards and pose more safety issues. In the Philippines, the median age of ferries is 41.48 years old, and the age distribution is centred between 35 and 50 years old (see Figure 3.13).
Given the age structure of the fleet operated by companies registered in the Philippines, especially for ferries, there is a strong potential for large recycling demand as old vessels will need to be replaced to ensure safety and comply with regulatory standards.
Note: This graph combines sea-going vessel from below 100 GT from S&P Global, with Clarksons World Fleet Register for sea-going vessel above 100 GT.
Source: OECD calculations based on Clarkson World Fleet Register
There are three major MARINA recognised industry associations in the shipbuilding industry in the Philippines, representing the interests of different maritime stakeholders and acting as intermediaries with government agencies and institutions on the regulation and development of the industry.
The Shipyard Association of the Philippines (ShAP), created in 2015, brings together stakeholders from the shipbuilding & ship repair industry, it is made up of various shipyards from Class A, B & C. In 2018, ShAP represented 97 shipyards across the country, including some of the largest ones: Tsuneishi, Austal, Herma and Josefa. In 2016, during the First National Shipyard Convention, it was decided that ShAP would be the single national shipyard association that would be recognised by MARINA, and that membership to ShAP will be mandatory. ShAP provides training, industry updates for its members, as well as networking events such as seminars, workshops or trade shows. It also engages in the promotion of research and development of technologies and sustainable practices. ShAP also acts as a facilitator of co-operation across shipyards and with the government, by representing the voice of its members to advocate for favourable policies that will benefit the sector and enhance industry standards.
The Society of Naval Architects and Marine Engineers (SONAME), promotes the interests, and the professional development of naval architects and marine engineers, and other professional related to the maritime industry such as academics or students. As the only association for naval architects and marine engineers duly accredited with the Professional Regulations Commission (PRC) of the Philippines, it gathers 896 members across the country. SONAME provides events to share knowledge, discuss current trends between various stakeholders, and share research, notably with MARINA. The society also publishes content related to the maritime industry, journals, newsletters and technical papers. SONAME acts as an intermediate with government agencies, and other institutions to contribute to the improvement of best practices in the industry and advance the interests of its members.
The Boating Industry Association of the Philippines (BIAP), represents various stakeholders involved in the manufacturing, selling or servicing of boats and related products, notably equipment. BIAP was established in 1976 to and aims to enhance the development and sustainability of the industry.
In addition to the above mentioned SBSR MARINA recognised industry associations, shipping associations also play an important role. The following are recognised by MARINA:
Concerned Metro Manila Tugboat, Barge & LCT Owner’s Association (CMMTBLA)
Supply Chain Management Association of the Philippines (SCMAP)
Lighterage Association of the Philippines (LAP)
Philippine Inter- Island Shipping Association (PISA)
Philippine Liner Shipping Association (PLSA)
Philippine Petroleum Sea Transport Association (PHILPESTA)
Philippine Coastwise Shipping Association (PCSA)
Philippine Shipping Vessel Owners Association Inc. (formerly ATOPHIL)
References
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[9] IMO (2011), 2011 Guidelines for the Development of the Ship Recycling Plan, ANNEX 2 - RESOLUTION MEPC.196(62), Adopted on 15 July 2011, International Maritime Organization, https://wwwcdn.imo.org/localresources/en/KnowledgeCentre/IndexofIMOResolutions/MEPCDocuments/MEPC.196(62).pdf.
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