Opinion: B.C. shipyards are currently building for the Canadian Coast Guard and Navy, but can they also take on BC Ferries' future ships?

Federal minister Chrystia Freeland 'dismayed' by BC Ferries' decision to build ships in China

Premier David Eby rules out cancelling BC Ferries' China-built ships contract

China-built major ships for BC Ferries draw mounting backlash, spark calls for contract cancellation

BC Ferries selects state-owned shipyard in China to build four new major vessels

Should BC Ferries' new big ships be built in British Columbia's shipyards?

BC Ferries' failed Pacificat fast ferries ships in Egypt listed for sale

BC Ferries' failed PacifiCat fast ferries could be turned into hospital ships

Opinion: BC Ferries needs more new big ships much sooner than later

Over the next several weeks, the Naalak Nappaaluk will undergo full-scale testing of its mechanical, scientific, navigation, and safety systems before it is formally delivered to the Canadian Coast Guard later in Summer 2025.

“Congratulations to Vancouver Shipyards on reaching this important milestone,” said federal Fisheries Minister Joanne Thompson in a statement on Wednesday.

“This sea trial marks an important chapter in the construction of our Offshore Oceanographic Science Vessel and underscores our dedication to ocean research and environmental protection.”

The Naalak Nappaaluk is part of Canada’s National Shipbuilding Strategy (NSS), a federal initiative aimed at rebuilding the country’s marine industry capacity, while supplying modern vessels for the Coast Guard and Royal Canadian Navy — an effort to replace aging and increasingly unreliable and outdated vessels, including large ships built during the early period of the Cold War.

The NSS has helped Seaspan become one of Canada’s most advanced shipyards, and in the process it is also supporting over 7,000 jobs annually and contributing $5.7 billion to GDP since 2012, according to a 2022 Deloitte analysis. In order to handle the federal government’s contract, Seaspan also made significant investments in its North Vancouver shipyards to expand its capacity and modernize the equipment.

In contrast, BC Ferries has come under widespread criticism in recent weeks following its decision to have its next class of major vessels built in China, citing significant cost savings and reduced pressure to raise fares on essential services. While this controversial move has drawn considerable attention, it is worth noting that in recent decades, BC Ferries has generally awarded its shipbuilding contracts to international shipyards, specifically European companies.

However, for the historic contract of building four new major vessels — the fleet’s new largest vessels — to serve the busy routes linking Metro Vancouver with Vancouver Island and the Sunshine Coast, the lowest bid from a European shipyard reportedly came $1.2 billion more than the winning Chinese bid, which is at a shipyard owned by the Government of the People’s Republic of China. This has sparked major concerns over the implications of trade tensions, international relations, national security, and economic nationalism.

Domestic shipyards, including Seaspan, did not submit bids for BC Ferries’ latest procurement, and they generally have not done so for the past 20 years. This raises questions about whether British Columbia’s shipbuilding industry has the capacity or economic incentive to compete in commercial procurements without similar policy support to what exists under the NSS.

Joel Lightbound, federal Minister of Government Transformation, Public Works and Procurement, framed the Naalak Nappaaluk as a symbol of what Canadian shipbuilders can achieve: “Through the National Shipbuilding Strategy, we are building modern and capable vessels for Canada’s fleet while generating economic benefits across the country.”

Once sea trials are complete, the Naalak Nappaaluk will be based at the Bedford Institute of Oceanography in Halifax, serving as the federal government’s primary oceanographic research platform. It will be used for habitat studies, marine surveys, and seabed mapping, while also supporting Coast Guard operations such as search and rescue.

Leo Martin, Senior Vice President of Programs of Seaspan, said the vessel’s performance is a testament to domestic expertise: “Watching a vessel that you have built go off to sea is one of the proudest moments during a shipbuilder’s career… This milestone is the latest example of how the National Shipbuilding Strategy is working and continued proof that our shipbuilding team is one of the best in North America, ready to build more highly complex, large vessels for Canada and our allies.”

Under the NSS, Seaspan’s North Vancouver Shipyards has been awarded a number of major non-combat vessel projects for the Canadian Coast Guard and Royal Canadian Navy. These include two Joint Support Ships (Protecteur-class), one heavy Polar Icebreaker, three Offshore Fisheries Science Vessels, and the Offshore Oceanographic Science Vessel of the Naalak Nappaaluk. Seaspan is also preparing to construct up to 16 additional “multipurpose vessels” for the Coast Guard.

Through the NSS, Seaspan has become a major economic engine in B.C., contributing approximately $2.3 billion in GDP and supporting over 3,300 jobs annually in North Vancouver alone. Nationally, through its subcontractors, for example, Seaspan’s NSS work has generated $5.7 billion in GDP and sustained more than 7,000 jobs per year, with projections to reach 11,000 annually by 2035.

Seaspan has expanded its workforce to over 2,500 employees in recent years, including hundreds of skilled tradespeople and apprentices, while awarding $2.4 billion in contracts to over 700 Canadian suppliers — many of them small and medium-sized businesses.

According to the most recent figures from the federal government, as of early 2025, Pacific-region companies, led by Seaspan’s North Vancouver operations, have received a total of approximately $10.25 billion in NSS contracts — a figure that represents about 37 per cent of the entire NSS program’s contracted value to date. Within the Pacific-region total, Seaspan itself has secured major individual contracts for some of the NSS’ largest non-combative ships, including $3.4 billion for two Joint Support Ships — $951 million increase from the original contract — and $3.2 billion for Canada’s first new polar icebreaker.

Seaspan began construction on the polar icebreaker earlier this spring, and it is expected to be ready by 2030.

Under the National Shipbuilding Strategy (NSS), Seaspan has completed and delivered three Offshore Fisheries Science Vessels to the Canadian Coast Guard: CCGS Sir John Franklin and CCGS Captain Jacques Cartier in 2019, and CCGS John Cabot in 2020. These vessels were the first full class of large ships delivered under the NSS and are now fully operational, supporting marine science missions across Canada’s coasts.

In addition to those initially completed vessels and this week’s milestone for the Naalak Nappaaluk, Seaspan is progressing on other major NSS projects.

Notably, the HMCS Protecteur, the first of two Joint Support Ships for the Royal Canadian Navy, was launched in December 2024 and is currently being outfitted for delivery in late 2025. At a length of 570 ft (174 metres), the Protecteur is the longest naval vessel ever built in Canada.

However, the NSS has also faced significant controversy due to its extremely extensive delays and cost overruns. Over the years, critics have argued that economic and job creation goals have been prioritized over national security, warning that Canada’s ability to defend its vast coastline — amid an increasingly unstable global landscape, including the thawing Arctic — and fulfill international commitments is being compromised by the sluggish pace of fleet renewal.

The program was first launched in 2010. However, many project timelines have slipped significantly, with major programs such as the Royal Canadian Navy’s Joint Support Ships and Arctic and Offshore Patrol Ships arriving years behind schedule. The total projected cost of the NSS has also soared well beyond early expectations, with some estimates now exceeding $100 billion. Notably, this estimate predates the pandemic; yet still, since 2020, global shipbuilding costs have surged by approximately 40 per cent.

“We found that during the audit period, the National Shipbuilding Strategy was slow to deliver the combat and non-combat ships that Canada needs to meet its domestic and international obligations. The delivery of many ships was significantly delayed, and further delays could result in several vessels being retired before new vessels are operational,” reads a 2021 report by the Auditor General of Canada reviewing the delays with building the large ships of the NSS.

“National Defence and the Canadian Coast Guard have implemented measures to maintain their operational capabilities until new ships are delivered, but interim capabilities are limited and cannot be extended indefinitely… This finding matters because the late delivery of ships for the Royal Canadian Navy and the Canadian Coast Guard could put at risk Canada’s ability to perform critical operations. These operations support the navy’s peace, defence, and security missions in Canada and around the world and the Coast Guard’s search and rescue missions, icebreaking, and other operations to ensure safety in Canadian waters.”

The federal government’s strategy originally anchored its shipbuilding contracts at two shipyards: Irving Shipbuilding in Halifax for combat vessels (including the Canadian Surface Combatant program) and Seaspan Shipyards in North Vancouver for non-combat vessels such as science ships and icebreakers for the Coast Guard and replenishment ships for the navy.

The overarching NSS agreements require both shipyards to reach a “target state,” which is the timely ramp-up of their “facilities, human resources, and processes and practices that meet international ship-construction benchmarks. This would enable the shipyards to efficiently build their assigned vessels at the required rate.”

When the agreements with the shipyards were first signed in 2012, it was anticipated that the North Vancouver shipyard would reach its target state within approximately three years, and the Halifax shipyard within six years. However, both shipyards experienced significant delays. In 2018, the North Vancouver facility was assessed for its degree in achieving the target state, with the government subsequently reviewing the shipyard’s “corrective action plan.” In 2019, the agreement with the Halifax shipyard was amended to grant an additional four years to meet its target state.

Persistent delays and backlogs at these two originally selected facilities in Halifax and North Vancouver, combined with an urgent need to replace aging icebreakers and meet economic and national security expectations, prompted Ottawa to add a third shipyard partner — Chantier Davie near Quebec City — in 2019. Davie was formally integrated into the NSS in 2023, focusing on non-combat ships, after demonstrating its capacity through Coast Guard refit work.

However, the Auditor General delivered a pointed assessment of the situation, concluding that the responsibility for the delays and inefficiencies lay, in part, with the federal government.

“We concluded that National Defence; Fisheries and Oceans Canada; Public Services and Procurement Canada; and Innovation, Science and Economic Development Canada did not manage the National Shipbuilding Strategy in a manner that supported timely renewal of the federal large vessel fleet during the audit period, but they did address issues that threatened the future renewal of the federal fleet,” reads the 2021 report.

“Ships continued to be delayed, and schedule and risk management practices needed to be improved. However, the departments made key decisions during the audit period to place the strategy on a more viable path. They also took steps to help sustain operations until new ships could be delivered, but there was little room for further delay. Delaying could result in a loss of capability to deliver essential government programs.”

Seaspan itself faced early hurdles — design revisions, sequencing challenges, labour shortages, and supply-chain disruptions drove schedule slips and cost inflation. Nonetheless, the company has steadily upgraded its infrastructure and recently achieved key milestones, demonstrating that it has worked through its growing pains and is now showing increasing capability and operational maturity.

A Spring/Summer 2024 “Build BC Ferries” advocacy campaign led by Seaspan, supported by various local unions and suppliers, called on BC Ferries to build the new major vessels in B.C. shipyards.

At the time, Seaspan believed it had the capacity to handle the order of building up to seven new major vessels — even though they were also taking on NSS construction.

“We have led the re-establishment of B.C.’s shipbuilding sector and are currently building the largest and most complex ships ever built in Canada,” a spokesperson for Seaspan previously told Daily Hive Urbanized in 2024 during their advocacy.

“A pragmatic, build-in-B.C. approach to ferries would sustain and grow our province’s shipbuilding capability while generating meaningful, long-term jobs and economic benefits for the many small businesses and workers who are a part of our industry.”

This is not without precedent. BC Ferries’ largest existing vessels — the Spirit of British Columbia and Spirit of Vancouver Island — were jointly constructed in the early 1990s by Allied Shipyards in North Vancouver and Seaspan’s Victoria Shipyards in Esquimalt.

These Spirit-class vessels are dedicated to the ferry network’s busiest route between Tsawwassen and Swartz Bay (Victoria). They have proven to be mechanically reliable and are expected to remain in service for decades to come, following major upgrades in 2018/2019. As part of this mid-life reinvestment, both vessels were sent to a Polish shipyard to be converted to dual-fuel operation, enabling the use of both conventional marine diesel and liquefied natural gas.

BC Ferries also maintains multi-year contracts with local shipyards for repair and maintenance work, much of which is carried out at Seaspan’s facilities in North Vancouver and Victoria, with a smaller share performed by Allied Shipyards.

But in September 2024, shortly after BC Ferries released the Request For Proposal (RFP) package, Seaspan publicly announced it would not submit a bid due to cost, stating that “no bidder will be incentivized to include significant Canadian/B.C. domestic content in their bids.”

“Canadian shipyards and their supply chains cannot compete with low wage countries that have lower employment standards, lower environmental standards and lower safety standards than Canada and BC. The most significant difference is that in BC, the wages that we pay our skilled trades workforce are substantially higher than in these other countries,” stated Seaspan.

As well, Seaspan had also indicated that due to its NSS commitments, it would not have the capacity to tackle the new vessels for BC Ferries until 2028 at the earliest. However, BC Ferries needs these vessels sooner than later to replace aging vessels to improve reliability and capacity. On the other hand, the Chinese shipyard is aligned with BC Ferries’ timeline of delivering the first ship in 2029, with subsequent ships arriving at six month intervals until the fourth vessel in 2031. CMI Weihai will begin construction in August 2026.

“We acknowledge the need for BC Ferries to get some of these replacement vessels very fast given their aging fleet,” continued Seaspan.

Overcoming the shadow of the failed fast ferries

The shipbuilding capabilities of local shipyards remain overshadowed by the legacy of BC Ferries’ fast ferries controversy in the 1990s. This is a debacle that, while highly damaging to public trust, was not necessarily the fault of the private sector and local shipyard companies themselves — a popular misconception.

The PacifiCat fast ferries are frequently brought up whenever the topic of B.C.’s shipbuilding industry arises. Even decades later, the fast ferries are often cited as a reminder of the risks tied to large-scale shipbuilding projects in B.C.

But according to a 1999 in-depth report by B.C.’s Auditor General that reviewed the factors that led to the fast ferries debacle, the primary fault lay with the provincial government’s micromanagement and the leadership of BC Ferries, which was at the time a provincial Crown corporation. This fiasco, of course, contributed to the downfall of the BC NDP-led provincial government and the rise of the BC Liberals to govern the province at the turn of the century.

Ultimately, the trio of failed mid-sized high-speed ferries, each carrying about 250 vehicles and 1,000 passengers, was an issue of a complete lack of due diligence and planning, and very poor project governance and management. The project undermined the goals of improving ferry services and revitalizing B.C.’s shipbuilding industry, with a specific push to become a new global leader in building aluminum fast ferries.

Originally intended to be built under a fixed-price contract by the private sector, the project quickly faltered when no shipyard stepped forward to assume the lead role.

A RFP procurement package was prepared, but it was never issued to receive fixed-price bids from companies.

The difficulty in finding a local shipyard capable of leading the fast ferries project was an early warning sign of the persistent challenges B.C. shipyards face today — namely, whether they can compete globally without substantial government support. Although local shipyards were praised for delivering the Spirit-class vessels around the same time the fast ferries initiative was launched, that project had already stretched their capacity to the limit.

“At the time the fast ferry project was being considered, the shipbuilding industry in Canada had been in decline for several decades. By world standards, it was small and undercapitalized, focused on Canada’s domestic market and dominated by government work. The shipbuilding industry in British Columbia had followed the national pattern of decline and had become dependent on BC Ferries for its survival,” reads the Auditor General’s report.

“Construction of the two Spirit-class ferries in the early 1990s demonstrated that the province no longer had individual shipyards with the financial capability to build large steel ships. A few yards could build smaller steel ferries, but larger projects could only be handled by setting up a management company to allocate construction work among a number of yards.”

Without issuing a competitive bidding process, BC Ferries moved forward with cost-plus contracts — a type of agreement in which a customer pays a contractor for the actual costs of a project, plus additional fees for the contractor’s profit and overhead. Under this higher-risk approach, BC Ferries took on full project management responsibility through the creation of a new subsidiary, Catamaran Ferries International (CFI).

This structure was plagued by governance problems, including conflicts of interest, as the same individual served as CEO of both BC Ferries and CFI, which undermined accountability and transparency. Similarly problematic was the issue of having half of CFI’s board members being executives of BC Ferries or CFI.

The project suffered from extremely rushed timelines and poor sequencing: the design and designer were selected before the operational needs of the vessels were established, and construction began before engineering and designs were sufficiently complete, leading to inefficiencies, material shortages, and expensive rework. Multiple complex critical systems — including fire suppression systems — had to be completely reinstalled mid-construction, and labour productivity was far below expectations.

“The most significant issue in all phases of the first ferry’s construction was that engineering drawings were not always completed in advance of need. Building without engineering drawings is sometimes done in shipbuilding, but only when the yard is very familiar with the technology being used and the work being done is not critical to the ship’s performance,” reads the report.

For another extreme example of poor sequencing, the first ship was floated out of the shipyard in 1998, even though it was not complete at this stage. Fitting-out work on the interior of the first vessel continued after it was launched, which made room in the CFI assembly building for the prefabricated modules of the second ship.

The Auditor General paints a picture of a project flying blind right from the start. In fact, major construction work began before the design and engineering plans of the vessels were ready — even though B.C. crews had no experience with building modern fast ferries and were highly unfamiliar with aluminum construction. Remarkably, no contract had been signed with the local shipyards when construction on the first vessel began in July 1996.

The decision to change the vessel design to fit existing terminal docks — rather than the more typical approach of modifying terminals to accommodate globally proven fast ferry designs — added unnecessary complexity, weight, and cost, ultimately reducing the vessels’ fuel economy, speed, and travel time performance.

Despite repeated steep cost escalation warnings and opportunities to pause, the project moved forward without any business case work to justify its costs and benefits, assess whether fast ferries are the most effective solution, and identify potential risks.

Today, advancing an infrastructure project without a detailed business case analysis is virtually unheard of — perhaps a lasting legacy of the fast ferries fiasco, which left behind hard-learned lessons in project planning and procurement.

“The schedule, like the budget, had not been subjected to the ‘reality check’ of being matched to a detailed, step-by-step and piece-by-piece implementation plan — not at the time the decision was made or at any time thereafter,” reads the report.

“Its success relied on many untested but critical assumptions, such as: the B.C. shipbuilding industry was ready to accept the project and a fair share of the related risks; there would be a calm labour environment during the project; BC Ferries and the shipbuilding industry had the management skills to carry out such a project; and the project would not face significant start-up problems.”

CFI even withheld information from the provincial government, and monthly progress reports — despite showing costs as being within budget — suddenly stopped without explanation. Concerned by the lack of transparency, the provincial government’s Treasury Board staff conducted their own site visit, where they discovered that construction was, in fact, behind schedule.

From the outset in 1994, each ship was projected to cost $70 million. But by the time all three vessels were completed in 2000, years behind schedule, the total cost had more than doubled to approximately $450 million (about $800 million in 2025 dollars, when adjusted for inflation). Despite the massive investment, the first two vessels saw limited use due to a range of operational challenges, including excessive wake, fuel inefficiency, slower-than-expected speeds, and passenger complaints about cramped onboard spaces.

The first vessel was even 50 tonnes over its intended weight, largely due to structural items that were not shown in preliminary drawings and omitted from original weight estimates. At full load, it had to run slower at 33 knots (61 km/hr) as opposed to its intended 37 knots (69 km/hr), and the engines had to run at a higher power than planned.

The third vessel was never put into service at all, with the BC Liberals-led government ultimately auctioning all of the vessels for a small fraction of the construction cost.

According to the Auditor General’s report, BC Ferries in 1994 had planned on taking a more cautious approach with the fast ferries project by carrying out a pilot project using leased ships. If the use of this trial proved fast ferries are suitable for the selected operating route and the conditions of the local waters, construction on the new vessels would proceed. But then, the provincial government intervened and decided to begin construction sooner without the pilot project.

Last week, Premier David Eby commented on his position not to intervene in BC Ferries’ contract with the Chinese shipyard to build its next major vessels. His words seem especially resonant in light of the past: “Procurement generally within government is kept separate from politicians for very good reason,” said the Premier. Perhaps, more meaningful than understood to many, given the consequences of his party’s previous political interference during the fast ferries era.

Much of the provincial government’s motivation in the 1990s for advancing the fast ferries project stemmed from a desire to revive British Columbia’s shipbuilding industry. However, the Auditor General later concluded that this goal was fundamentally flawed, as there was no clear framework for how success would be measured.

“There was no indication of how long the industry would have to be self-supporting (not requiring government assistance) before it could be deemed to be revitalized. In fact, at the inception of the project, the only measure of performance available was a single projection of expected person-years of employment,” reads the report.

Put simply, B.C. at the time was already considered a high-cost jurisdiction for shipbuilding, and the only realistic path to narrowing the competitiveness gap was through labour savings — an unlikely prospect given the province’s labour environment and the presence of very strong unions representing shipyard workers.

“No analysis was carried out on the likely costs and benefits of focusing British Columbia’s shipbuilding industry on the export of aluminum fast ferries. Nor was there an analysis of the likelihood that the industry would be competitive on price in world markets. Roughly half the cost of a ship is materials and half is labour, overhead and profit. It was known at the time the project was announced that Canadian yards had some price disadvantage in obtaining equipment and machinery, and that the aluminum for the fast ferries would have to be bought offshore,” continues the report in 1999.

“Thus, any competitive edge would have to be obtained through lower labour or overhead costs, or lower profits. Canadian wage rates for shipyard workers were known to be higher than those in most competing countries, and there were indications that the Canadian industry’s productivity was not sufficient to compensate for the wage disparity.”

These same challenges continue to influence procurement outcomes today. In 2024, a Seaspan spokesperson echoed the long-standing concerns during the “Build BC Ferries” advocacy campaign.

“BC shipyards have a higher cost structure, primarily due to skilled worker wages. A low-cost bid project, with no incentive, points or value for the use of BC workers and suppliers, ensures that much or all of the work will be conducted in low wage nations, with low environmental, safety and employment standards,” said the Seaspan spokesperson.

China’s dominance in global shipbuilding

Decades later, the concerns and structural challenges identified in B.C.’s Auditor General’s report have only become more pronounced.

Labour costs in the Lower Mainland have continued to soar, driven in part by the region’s high cost of living and worsening housing affordability and supply issues.

Compounding this, B.C.’s skilled trades workforce is shrinking. A combination of an aging labour force, declining interest among younger generations in pursuing trades, and difficulties in attracting and retaining workers — also tied to housing challenges — has resulted in a persistent labour shortage across the sector.

Furthermore, for instance, Seaspan workers currently building the new ships for the Canadian Coast Guard and Royal Canadian Navy are represented by various unions.

Labour costs have also gone up considerably because skilled trades in B.C. are a shrinking workforce, resulting in a significant labour shortage, with aging workers, declining interest among younger generations in this field of work, and challenges with attracting and retaining such workers — also because of housing.

Another, albeit lesser, contributing factor is the difficulty many workers face in accessing shipyard sites in North Vancouver. The North Shore is particularly constrained by housing availability and affordability. For example, the majority of Seaspan’s workforce resides south of Burrard Inlet and must commute daily across either the Lions Gate Bridge or Ironworkers Memorial Bridge, adding major transportation burdens to an already strained labour market.

In the absence of any potential cost savings from local labour — and given the continued need to import many materials and components — ongoing structural subsidies from both the provincial and federal governments would likely be necessary to improve the global competitiveness of B.C.’s shipbuilding industry. Additional significant measures would be needed beyond awarding major public sector contracts to shipyards.

Based on data from international shipbroking firm Intermodal earlier this year, China, South Korea, and Japan combined account for over 90 per cent of global shipbuilding. Governments in all three countries have identified shipbuilding as a key strategy for economic development, trade, and defence.

On Saturday, in response to criticism from Chrystia Freeland, the federal Minister of Transport and Internal Trade, over BC Ferries’ decision to award the contract to CMI Weihai Shipyards, Jeff Groot, Executive Director of Communications for BC Ferries, told Daily Hive Urbanized that the sourcing vessels from Chinese shipyards is an increasingly common practice in Canada’s marine sector.

He stated that Canadian companies have acquired approximately 100 vessels built in China over the past decade, including one last year by the federal Crown corporation Marine Atlantic.

The 2024-built Ala’suinu is a 666-ft-long (203-metres) ferry vessel carrying about 1,000 passengers and 476 vehicles, operating on Marine Atlantic’s services between Newfoundland and Nova Scotia.

“Globally, only a few shipyards have the capacity to deliver complex passenger ferries on the timelines and budgets required,” said Groot.

It should also be noted that BC Ferries’ new major vessels feature a non-conventional design, adding to the complexity of their construction. As part of the ferry corporation’s efforts to reduce emissions, the ships will have hybrid battery-electric propulsion, with plans to transition them to fully battery-electric operations over the longer term. This likely necessitates finding a shipyard with some proven experience working with extensive battery technology.

Shipyards in China alone are responsible for 62 per cent of all shipbuilding in the world. Chinese shipyards have received orders for over 3,500 out of more than 5,700 vessels that have been ordered around the world. Amid growing order backlogs and significant cost escalation since the pandemic, an increasing number of customers are turning to China’s high-capacity shipyards, which are able to deliver vessels more quickly and cost-effectively, compared to some European shipyards, for example.

Governments in South Korea and Japan provide their shipbuilders with a range of support, including financial investments for greener vessels and measures that further enhance overall competitiveness.

According to a 2021 report by the Organization for Economic Co-operation and Development and a 2024 analysis by the U.K.-based Centre for Economic Policy Research (CEPR), China’s dominance in global shipbuilding is significantly underpinned by extensive and coordinated government support, which includes a mix of industrial policy tools, subsidies, and state-backed financing.

Starting in the early 2000s, the Chinese government identified shipbuilding as a strategic industry and integrated it into its broader industrial policy planning. It was included in the “Strategic Emerging Industries” framework and later prioritized under the “Made in China 2025” initiative, aimed at boosting high-tech and capital-intensive sectors.

The Chinese government has substantially supported its shipbuilding industry through direct subsidies, such as grants and tax breaks, as well as indirect forms of support like cheap credit, preferential loans, and debt forgiveness — often facilitated by large state-owned banks. This financial backing helped Chinese shipyards expand capacity, invest in advanced technology, and lower prices to gain market share, sometimes even undercutting foreign competitors.

“In the 2000s, China entered the shipbuilding scene. Within a few years, China overtook Japan and South Korea to become the world’s leading ship producer in terms of output. China’s national and local governments provided numerous subsidies for shipbuilding, which we classify into three groups. First, below-market-rate land prices along the coastal regions, in combination with simplified licensing procedures, acted as ‘entry subsidies’ that incentivised the creation of new shipyards. Second, regional governments set up dedicated banks to provide shipyards with ‘investment subsidies’ in the form of favourable financing, including low-interest long-term loans and preferential tax policies,” reads the CEPR analysis.

“Third, China’s government also employed ‘production subsidies’ of various forms, such as subsidized material inputs, export credits, and buyer financing. The government-buttressed domestic steel industry provided cheap steel, which is an important input for shipbuilding. Export credits and buyer financing by government-directed banks made the new and unfamiliar Chinese shipyards more attractive to global buyers.”

Additionally, the Chinese government has played a key role in shaping demand-side policies — for example, by encouraging domestic shipping companies to place orders with Chinese shipyards. In a move not entirely unlike Canada’s NSS, China has also leveraged its shipbuilding sector to renew and expand the Chinese navy, with much of this believed to be driven by Beijing’s desire to be operationally ready for a potential conflict with Taiwan and the United States as early as later this decade.

Furthermore, China’s state-owned enterprise system allows for coordination between shipbuilders, suppliers, and shipping companies, enhancing economies of scale and vertical integration. The recent consolidation of some major state-owned enterprises further strengthened global competitiveness. China Merchants Industry (CMI) Weihai Shipyards, the state-owned shipyard selected by BC Ferries to build the new major vessels, is a part of this system.

Aside from the government’s overwhelming support and strategic industrial planning for the shipbuilding industry, which can reasonably be described as operating within a quasi-command economy, as it integrates civilian and naval shipbuilding, other immense structural advantages include lower environmental considerations, cheap labour, the sheer economies of scale of China’s overall industrial capacity that extends into shipbuilding, and the benefits of nationally designated Free Trade Zones. With all that said, CMI Weihai Shipyards, the facility that will build the new BC Ferries vessels, does not appear to be located in such a zone.

Is it worth trying to compete in the global shipbuilding industry?

All of this raises an important question: To what extent are the Canadian and British Columbia governments willing to subsidize and invest in local shipyards if they are to be truly competitive on a global scale and secure contracts beyond the public sector?

Beyond China, South Korea, and Japan, many European governments also provide significant support to their shipbuilding industries, including to shipyards that have previously fulfilled orders for BC Ferries.

Within Canada, some shipyards have a competitive advantage over others due to substantial financial assistance from their provincial governments — particularly in Quebec, where support includes tax credits, forgivable loans, and grants totalling well over $1 billion, according to Seaspan. For instance, Chantier Davie — the third shipyard and latecomer to the NSS, competing directly with Seaspan’s previous control for non-combat vessel work — is receiving $519 million from the Quebec government to expand its facilities.

Before raising the spectre of aggressive structural subsidies to B.C. shipyards, in recent years, BC Ferries officials have repeatedly noted that building their new ships at domestic shipyards would require significant subsidies from the provincial and/or federal governments to account for the far higher costs.

Officials at BC Ferries further suggested that building the new major vessels in Canada could cost hundreds of millions — or even billions — more. The lowest European bid for the four vessels was reportedly $1.2 billion higher than the winning Chinese bid. Given that, and considering the significant cost escalations already seen under the NSS, it is not unreasonable to conclude that constructing such large vessels domestically could indeed possibly cost billions more. Whether the cost-benefit equation makes sense at the likely price point is a question for governments and industry to assess.

To protect the competitiveness of future procurements, BC Ferries has not disclosed the contracted price with CMI Weihai Shipyards.

In response to the outcry over the Chinese contract, Premier Eby said he will approach Prime Minister Mark Carney to develop a strategy to help ensure BC Ferries’ future orders of new major vessels — as many as four additional ships as early as the late 2030s — will be built in B.C. shipyards. Eby’s predecessor, the late John Horgan, also had a desire to boost B.C. shipbuilding, which was a part of the BC NDP’s 2020 provincial election platform.

When Seaspan announced in September 2024 that it would not submit a bid to build the first four new major vessels, it also expressed hope that the provincial government would collaborate with the local shipbuilding industry to construct the remaining vessels. These additional ships are expected to be built in the mid-to-late 2030s and will be part of a separate procurement process.

“Seaspan has commissioned independent economic studies that show substantial return on investment for the B.C. Government to support building the New Major Vessels in B.C.,” reads Seaspan’s September 2024 statement on not bidding, before referencing the current NSS experience.

“Today we are already building large vessels (the same size as New Major Vessels) in B.C. — the capability is already here. Unlike bridge, dam and hospital projects which have fixed duration, the B.C. shipbuilding industry will provide 20+ year jobs to our workers and associated income tax revenues and other economic benefits to the province.”

But if a major public investment is required — and if local shipyards truly have the capacity to take on additional work, and are not completely bogged down by the NSS — such a decision must be weighed against a backdrop of growing fiscal pressures and competing infrastructure priorities needed to support Canada’s growing population. There is no shortage of infrastructure projects with escalating construction costs that are in need of funding — new rail rapid transit, highways, major hospitals, schools, and utilities, as well as publicly-funded affordable housing.

As well, both the federal and provincial governments are contending with substantial budget deficits and rising debt, with no clear path to resolution amid a sluggish economy and Canada’s underlying structural weaknesses.

To date, Seaspan has been able to reinvest in its facilities thanks to multi-billion-dollar contracts awarded through the federal government’s NSS.

Over the past decade or so, the company has invested at least $200 million into upgrading its North Vancouver shipyards’ infrastructure to meet the demands of its NSS commitments.

One of these improvements at the North Vancouver shipyard is a landmark in its own right and can be visibly seen from a great distance across Vancouver harbour. In 2014, Seaspan completed a gantry crane, nicknamed “Big Blue” — deemed to be North America’s largest gantry crane at the time, measuring 262 ft. in height and 249 ft. in width, and weighing 300 tonnes.

This crane was prefabricated in China and then transported to North Vancouver for assembly.

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