While it is difficult to find an industry where fierce competition and price wars are not the hallmarks, it seems at times that the ship repair industry has created and patented the formula. Ship repair and conversion yards have weathered years of cut-throat battling, as a slew of new, low-cost competitors regularly make an appearance. The trend is predicted to continue indefinitely.
In general, ship repair operations are weathering many of the same financial, corporate and political storms as other major industrial companies. According to Dennis Stonebridge
, a shipping consultant for Drewry Shipping Consultants
, the forecast revenue for 1998-2003 is likely to fall in total by an estimated 1.5 percent. Strong competition can be touted as helping to drive and keep prices down, but it is by no means working solo. The lull in repair activity is further hampered by an insignificant rise in work on the major bulks following recent investment in new tonnage. General cargoships, Stonebridge reasons, are thus likely to fuel much of the forecast revenue, accounting for 15 percent of total revenue, with cruise and ferries playing a prominent role.
Whereas the Asian financial crisis has been a major source of market turmoil around the globe, the downturn could actually prove beneficial for the ship repair segment, as ship repairers take advantage of consistent exchange rate gains against the U.S. dollar. These gains, however, will be lost on yards in Europe and North America, which are projected to lose ground. Specifically, the Far East is projected to attain approximately an 11 percent share of the global revenue by 2003, with south East Asia to grow 1.7 percent by the same period.
The global ship repair scene has been shaped much in the same fashion as other international businesses, in that the market has been swept by concentrated restructurings and consolidations. In Europe and the U.S., the keyword has been downsizing, or, in some cases, complete withdrawal from the market altogether. But while the Drewry forecast paints a gloomier picture, there are of course exceptions to every rule, and these are seen with the good successes (to name just a few) of yards such as BMI, Atlantic Marine Inc. - Mobile and Tampa Shipbuilding in the U.S.
Northern European shipyards have, too, shown strong resilience following radical retrenchment policies and are now returning to extreme competitiveness in certain markets. A prime example: the U.K.'s emergence as a primary center for offshore conversion work in the North Sea Region. In addition, high value jobs are the mark of work in both European and Norwegian yards, both of which have benefited handsomely from continued strong activity in the North Sea.
Meanwhile, ship repair and conversion operations has become a core tenant of emerging nations -- which offer plentiful and cheap labor -- in south East Asia, China and the former Eastern Bloc. In general, these yards have significantly upgraded facilities and have put a stronger emphasis on sub-contracted labor and pooling options.
While much attention in the maritime world is fixed on the Far East, it is interesting to note that Stonebridge concludes that the Middle East
has overtaken Singapore as the world's most prestigious ship repairer, based on the market share gained in the repair of the industry's flagships (large tankers). The change, however, is not necessarily permanent, as exchange rates have played a large role in swaying the market to the Middle East, and could just as easily help to sway it back.
Where's The Demand?
As Table 1 shows, the greatest repair demand is set to be derived from general cargo vessels and cruise/ferries. Tankers and bulk carriers fall some way behind (although it should be noted that only vessels in excess of 10,000 dwt have been considered). The yards in Singapore and the Middle East are often cited for repairing the largest tankers (VLCCs and ULCCs), but it is clear that while this is a strong niche, in value terms smaller vessels are more lucrative.
Meanwhile, data indicates that an increase in ship repair demands from the oil tanker fleets is expected over the next five years, reflecting, in part, the fleet's rapid expansion of the past few years. Structural concerns, particularly surrounding older bulker fleets, will continue to be of concern, and it can be assured that the mantra regarding the "aging fleet" will continue to grow old, loud and strong. In terms of the bulk carrier fleet in particular, Stonebridge anticipates a 50 percent increase in the workload for these vessels.
The preceding was in part excerpted from "Shiprepair and conversion: The global outlook," presented by Dennis Stonebridge, shipping consultant, Drewry Shipping Consultants, at the Ship Repair & Conversion '98 exhibition and conference held in London last month.