Market Improving for German Equipment Suppliers
The German Engineering Federation (VDMA) reported a good order situation for German marine and offshore oil and gas equipment suppliers, but the upsurge in incoming orders is not making the sector euphoric.
“The boom in world ship newbuilding orders in 2013 gave us strong order growth, particularly from China and Korea. Here our ongoing export commitment in the global market is paying off: Germany remains the leading country for marine equipment suppliers worldwide. At the same time, we registered above average growth in incoming orders in the offshore oil and gas area,” stated Dr. Alexander Nürnberg, Chairman of VDMA Marine and Offshore Equipment Industries, at the association’s press conference held in Hamburg on Wednesday. But despite this overall picture, we mustn’t lose sight of the fact that although 40% of companies have achieved growth a quarter of firms have reported a decline,” Nürnberg added.
The improved order situation has meant that overall the workforce could be kept at the previous year’s level and productivity in the companies could be increased. “This is also absolutely necessary so that companies can finance their technical edge with their own R&D and at the same time withstand the enormous pressure on prices,” Nürnberg explained. “We also do not expect to see a continuation of the shipbuilding boom in 2014, but rather a further consolidation and fresh challenges.” Customers are requiring suppliers to provide ever more system expertise and solution proposals already during the development phase. “That continues to represent our chance as makers in Germany vis-à-vis the international competition,” Nürnberg emphasized.
Sector sales €11.7 billion in 2013
German marine and offshore equipment suppliers achieved sales of €11.7 billion (+1%) with 68,000 employees in 2013. The export rate was 72%. But actual exports are much higher, as many German maritime product and system suppliers cooperate to integrate components into overall systems for delivery to shipbuilders worldwide.
Incoming orders well up
Following 3.9% in 2012, growth in incoming orders reached a gratifying 11.2% in 2013. This considerable increase is attributable to the surge in orders in global merchant shipbuilding in 2013 with 70% growth in the number of vessels. However, the sector expects to see a definite consolidation and is bracing itself to meet a drop in demand in 2014. There was already consolidation in the offshore oil and gas industry in 2013. The sector anticipates pent-up demand in this area in 2014-15.
Opportunities in new export markets
The top three countries for shipbuilding are China, Korea and Japan. Brazil and Russia, which have become important shipbuilding countries in recent years, also expanding thanks to demand from the oil and gas segment, are currently showing no growth. A total of 3,375 oceangoing ships were ordered worldwide in 2013 (previous year: 1,977). Orders for 1,343 (651) vessels were placed in China, 557 (231) in Korea, 566 (361) in Japan, 30 in Brazil (66), 10 in Russia (11) and 207 (155) in the EU-28, including 10 (10) in Germany. Global orders on hand for ships accordingly surged from 5,550 to 5,994 units last year.
China and Korea much more important as markets
The main foreign customers of German suppliers in 2013 were in Asia, attracting 46% of orders (+ 6), and other European countries, with 31% of orders (- 5). China is the largest foreign market accounting for 25% of orders, well up on the previous year (+ 8). It is trailed by Korea with 14% (+ 4). Declines were reported for the rest of Asia and Latin America. The sector receives its incoming orders currently from merchant shipbuilding and special-purpose shipbuilding. The latter remains, particularly for work boats, stable worldwide at a high level.
Global competition is intensifying. German suppliers that offer in particular custom-fit solutions for retrofitting – e.g., for making ships more energy-efficient or adapting them to meet new emissions legislation – have advantages. Companies can also sharpen their competitive edge by providing smart service solutions that directly help operators reduce operating costs.
Offshore oil and gas – growth despite global market stagnation
German suppliers are very successful with ongoing export activities in the offshore oil and gas industry and are securing further market shares in a tight and highly competitive sector. “Perseverance and in particular reliability, availability and quality are called for here in a rather conservative market,” Nürnberg stressed. The ideas of German companies for environmental and safety standards also give them a considerable competitive advantage precisely in this market.
Liquid Natural Gas – propulsion on the oceans
Over 90% of transport services worldwide are by sea. Environmental protection represents a key factor in maritime transport, and the current marine propulsion systems are much more energy-efficient than any land or air transport. Pollutant emissions can be further reduced with the use of LNG.
The engine is at the heart of propulsion technology. Innovations in this area have the greatest influence on energy efficiency. The energy- and cost-saving and at the same time environment-friendly operation of ships and offshore plants is this the sales argument today. But here the conditions for the operators must apply everywhere. “Our industry depends on a reliable, international legal framework. Only with this can we successfully market ‘high tech made in Germany’ globally,” noted Klaus Deleroi, Senior Vice President at MAN Diesel and Turbo SE, Augsburg. “Makers show a massive commitment in their R&D activities with no certain prospect of success. We can thus offer operators today a wide range of highly efficient engines running on conventional fuels including exhaust gas cleaning as well as dual fuel engines, which can also be operated with gas. Overall LNG is the most environment-friendly and probably also the most commercially promising solution.”
Secret of success – staff
Innovations, productivity improvements and new services are possible only with motivated, well trained people who are team players. “We are training increasingly in house, to a much greater extent than ten years ago. Our team is our capital. However, the quality of school education is causing us concern. The young people who come to us require much more attention and further training in companies. We cope by working together, but the outlay for us is increasing all the time,” Nürnberg noted when discussing the subject of locational advantages.