Carnival to Help China Build Its First Cruise Ship

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Carnival Corp. agreed to help build China’s first cruise ship as travel demand increases, placing the nation on course to become the second-biggest market for the leisure boats in three years.

Carnival will sign a memorandum of understanding with state-owned China State Shipbuilding Corp. today on a possible joint venture “aimed at accelerating the development and growth of the Chinese cruise industry,” the Miami-based company, the world’s largest cruise-line operator, said in a statement. Italy’s Fincantieri SpA, the biggest builder of cruise vessels, may be the third party in this venture, Carnival said.

Economic growth and increased spending power in China will help the nation become the second-largest global cruise market after the U.S., with 4.5 million passengers by 2020, according to China’s Ministry of Transport. Any deal to build cruise vessels would help China State Shipbuilding expand its revenue sources beyond container liners and dry bulk carriers.

“Cruise liners are the part of the shipbuilding business with the highest commercial value,” Lawrence Li, a shipping analyst at UOB Kay Hian Investment Co. in Shanghai, said by phone. “But China and CSSC will be starting from scratch, and growing the capacity to build cruise ships will take some time.”

Five calls to the office and mobile phone of Ke Wangjun, a spokesman at China State Shipbuilding, went unanswered. The statement from Carnival didn’t say when the joint venture might be formed.

Royal Caribbean

Carnival joins Royal Caribbean Cruises Ltd., the world’s second-largest cruise operator, in search of faster growth rates in China. Carnival is also trying to lure more holidaymakers in Asia after a spate of incidents in other markets since 2012, including illness among passengers onboard its ships in the U.S., a fire on a Triumph cruise and the wreck of its Costa Concordia ship off the Italian coast in 2012.

Carnival has deployed four ships to China and said in September that it would relocate Chief Operating Officer Alan Buckelew to Shanghai to lead the company’s expansion in the country. Royal Caribbean Cruises Ltd. has international cruises departing from Asian ports including Shanghai, Tianjin and Xiamen in China, Yokohama in Japan, and Singapore, according to its website.

China is poised to become the world’s second-largest market, behind the U.S., by 2017, according to the World Travel Market and Euromonitor International.

Under the China agreement, Carnival will provide ship-design and building expertise to China State Shipbuilding, according to the statement. European shipyards dominate the building of cruise vessels, accounting for 24 of 27 ships on order in the 2014-to-2017 period, according to the CLIA Europe trade association.