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Qualify, Quantity Issues Abound

The Ship Repair & Conversion exhibition in London last month provided a forum not only for companies to exhibit their wares, but to air their grievances on what ails the industry.

Ship repair and conversion business has battled many of the same issues found on the newbuild side, namely the problem of too much capacity — much of it coming online from developing countries — which is helping to keep prices artificially low.Astilleros Espanoles: Moving Forward With Quality Spain's Astilleros Espanoles group serves well as a microcosm of the changes sweeping the world ship repair and conversion industry. By the end of 1998, the traditional European shipbuilding and repair powerhouse must proceed with plans to privatize and get all of its yards profitable, all the while implementing drastic capacity reductions. At the same time, the yard is faced with a price-driven, cut-throat competition repair and conversion market.

According to Astilleros Espanoles, the main problem in running a profitable ship repair and conversion operation is the result of unregulated shipyard capacity expansion. "Everybody is busy, but prices are still depressed because the market is still unbalanced," said Astilleros Astander executive Angel F. Diaz-Munio. "If we have to be ruled, the rules have to be the same and equal for all." In order to comply with the EUmandated capacity reduction program, Astilleros has had to ban Astander from conversion work, allowing only repair jobs for the yard. Meanwhile, the Astano yard is limited to offshore work. While subsidy matters, and particularly the passage of the OECD agreement, are viewed by the group as critical to creating the mythical level playing field, Astilleros believes that worldwide capacity reduction is just as crucial of a link to restoring balance to the repair and conversion markets, and the heart of restoring profitable pricing levels.

While up front pricing is, of course, important, Mr. Diaz- Munio said that the whole spectrum of the job — completed correctly and on schedule — is vital to determining the real cost of a job. Despite the challenges, the group as a whole and the Astander yard specifically have maintained a very positive level of work, depending on loyal customers and focusing on jobs where high quality and high technical solutions have priority over price.

"It is difficult to compete with the up and comers on price," said Diaz-Munio. "To expand our markets, we must find the customers who are more interested in quality, safety and price." This stance is proven on the yard's reference list for the six month period from May to October 1997, a list which includes 33 vessels, ranging from chemical tankers from JO Tanker and Storli, to a reefership from Norbulk Shipping and a LGC ship from Hanseatic. In a typical year, Astander will repair between 60 and 70 ships. In fact, Astander had a record year in 1996 for repair activity, a pace that has kept up in 1997. To October, Astander's two drydocks have recorded 93 percent occupancy, with the larger 754.5 x 106 ft. (230 x 32.2 m) dock having an amazing 98 percent occupancy rate. Astander is currently in the midst of a $7 million investment plan, which includes: a 200-ton tower crane for Drydock 2; enlargement of repair quays, overall by 229 ft. (70 m); a 25-ton tower crane for a new quayside, which is scheduled to be in service this month; and an increase in the seaway draft, allowing arrivals and departures 24 hours a day.Tuzla Yard Poised To Capitalize On Shift Turkey is poised to take the ship repair market share from European and Far East competitors, said Kahraman Sadikoglu, president of the Tuzla Shipyard. That is, if its new government is willing to back the political and fiscal programs needed to ensure that its yards can meet shipowner's demands of safety, quality, cost and timeliness. The Tuzla yard has made a major push to capture more complicated repair and conversion jobs. In its docks now is a conversion which embodies the type of work the yard envisions for the future, the Scarabeo 7 rig conversion. Scarabeo 7 will be converted from an accommodation rig to a drilling platform, a project that will entail 6,000 tons of steel and 500 tons of pipe. It is due for delivery to Saipem in Italy in October 1998. Graduating from standard drydocking work to more complex conversions and offshore work was a long process in the making. According to Mr. Sadikoglu, despite the country's low labor rates, owners were, and to some degree are, still not trusting of the quality of Turkish yards. Mr. Sadikoglu picked up on owners' demands and initiated a new training program for the yard's workers three years ago. An investment in training and safety matters, it seems, has turned into big dividends, with contracts such as the Scarabeo 7 conversion and the FPSO Firenze conversion.

"I believe that there is a big potential in Turkey, there is now a big demand for repair and conversion work particularly in the offshore markets," said Sadikoglu, "but, unfortunately, we need more capacity."

 
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