Material Insights · Understanding the Material World

Ship propulsion and Vehicles, ships, rail, aircraft

Engines and propulsion are the core bought-in system of every ship a yard builds, so fuel rules decide what shipbuilders install; with 91% of 2025 tonnage built in China, Korea and Japan and the IMO's net-zero rules still not adopted, India is using a ₹69,725 crore package to win a share of the build.

Ship propulsion (energy) and Vehicles, ships, rail, aircraft (industry): 5 relationships.

How they are linked

1. Industry input

Physical flow · Strong · Propulsion systems to shipbuilders

A merchant ship is a hull built around its main engine, shafting and propeller, so propulsion is a core bought-in system for shipyards; the site rates it 5 of 5 for aircraft, ship and rolling-stock builders.

  • 5 of 5 criticality for aircraft, ship and rolling-stock builders

Shipyards build the hull but take the main engine and propulsion from specialist suppliers, which is why the site rates propulsion as critical for them. The engine and fuel choice, whether oil, LNG, methanol or ammonia ready, is made at order and shapes the ship's fuel use over its working life.

Enterprise types that depend on it:

  • Aircraft, ship and rolling-stock builders: ship propulsion (criticality 5 of 5)

Sources: Material Insights

2. Built in East Asia

Geography and ownership · Strong · Ship and propulsion demand concentrates in three countries

Shipbuilding has concentrated in a few East Asian countries with large yards and supplier clusters, so demand for marine engines and propulsion is concentrated there too.

  • 91% of ship gross tonnage completed in 2025 built in China, Korea or Japan
  • 56% of world deadweight capacity owned by Asian companies, start of 2026
  • 397 million dwt fleet owned by Greece, the largest owner, start of 2026

Owners are more spread out than builders: European companies own 34% of capacity, yet almost all new ships come from three countries. Any country trying to enter shipbuilding has to build or attract a propulsion supply base as well as yards.

Sources: UNCTAD

3. IMO fuel rules delayed

Policy · Medium · IMO decisions set which propulsion yards install

The IMO's Net-Zero Framework would set limits on the greenhouse gas intensity of ship fuel, combined with a pricing and reward mechanism, which would push new ships towards engines that can burn low-carbon fuels; its delay leaves owners unsure what to order.

  • 57 to 49 IMO vote to adjourn adoption of the Net-Zero Framework, October 2025
  • 1 March 2028 earliest entry into force after the delay

The October 2025 session adjourned for one year. At MEPC 84 in April 2026 the framework survived as the only option on the table but was not adopted, and countries planned to try again at MEPC 85 in December 2026. Until the rules are settled, owners ordering ships that will sail for decades have to choose engines without knowing the carbon price they will face.

Sources: DNV; Carbon Brief

4. India's shipbuilding push

Policy · High in India · Indian incentives aim to build ships, and their propulsion demand, at home

India's share of world shipbuilding is small, so in September 2025 it approved a package of financial assistance, development schemes and a maritime fund to expand yards and ship finance.

  • ₹69,725 crore shipbuilding and maritime package, September 2025
  • ₹24,736 crore Shipbuilding Financial Assistance Scheme, extended to March 2036
  • 4.5 million GT annual shipbuilding capacity targeted

The package also includes a ₹25,000 crore Maritime Development Fund and a ₹19,989 crore Shipbuilding Development Scheme, and the government expects about ₹4.5 lakh crore of investment. The package is aimed at yards, finance and capacity; it does not by itself create a domestic marine engine supply base, which remains the gap to fill.

Sources: Prime Minister's Office, India

5. Ships end life in India

Physical flow · High in India · Old ships return to India as scrap steel

At the end of their life, ships are sold for breaking, and India, Bangladesh and Türkiye take most of them, returning steel and equipment to the market.

  • 80% of ship recycling in India, Bangladesh or Türkiye, 2025
  • ₹4,001 crore ship-breaking credit note in India's 2025 package

The credit note in the shipbuilding package ties India's large recycling base to its plans for new building, so the same policy covers both ends of a ship's life.

Sources: UNCTAD; Prime Minister's Office, India

For investors

Key learnings

  1. Ship propulsion demand follows yard orders, and 91% of 2025 tonnage was completed in China, Korea and Japan.
  2. The IMO's fuel rules were still not adopted in 2026, with the next attempt set for December 2026, so owners are choosing engines for long-lived ships without knowing the carbon price.
  3. India's ₹69,725 crore package targets yards, finance and capacity rather than engines, so a domestic propulsion supply base is the missing piece and an opening for local suppliers.

What to track

  • New ship orders by fuel type: Shows how fast LNG, methanol and ammonia-ready engines replace oil-only ones (Monthly · classification societies, shipbroker reports)
  • IMO Net-Zero Framework negotiations: Adoption would lock in demand for low-carbon propulsion (Per session · IMO MEPC)
  • Indian shipyard order books: Show whether the package is producing orders (Quarterly · Cochin Shipyard, Mazagon Dock results)

For policymakers

Key learnings

  1. Shipbuilding is concentrated in three countries, so India needs a propulsion and equipment supply base, not only yards, to compete.
  2. India already handles a large part of world ship recycling, and the ₹4,001 crore credit note links scrapping to new domestic builds.
  3. The IMO's fuel rules, earliest in force in 2028, will decide which engines and fuels Indian yards and ports must support.

What to track

  • Shipbuilding Financial Assistance claims and gross tonnage built in India: Measures progress towards 4.5 million GT a year (Yearly · Ministry of Ports, Shipping and Waterways)
  • IMO MEPC outcomes: Set fuel and propulsion requirements for new ships (Per session · IMO)

India

India builds little of the world's tonnage but, with Bangladesh and Türkiye, handled 80% of ship recycling in 2025; its ₹69,725 crore package of September 2025 aims to grow shipbuilding towards 4.5 million GT a year.

Sources

  1. Vehicles, ships, rail, aircraft: materials, Material Insights (2026)
  2. Maritime and other transport: insights, UNCTAD (2026)
  3. Decision on the IMO Net-Zero Framework delayed for one year, DNV (2025)
  4. Comprehensive 4-pillar approach to strengthen shipbuilding, maritime financing and domestic capacity, Prime Minister's Office, India (2025)
  5. Q&A: How countries got the global net-zero shipping deal back on track, Carbon Brief (2026)