Shipbuilding Supplier: Visible Recovery After Major Show of Strength

[By: VDMA]

The maritime suppliers in Germany cannot be satisfied with the 2020 financial year, but now expect good business  developments in the current year, despite the still ongoing imponderables. "Due  to the short-term slump in the order situation, we did not achieve our sales  targets last year. However, the current development in the markets with a  significant increase in incoming orders makes the industry optimistic, and  expectations for the future are positive," says Martin Johannsmann, Chairman  of the Board of VDMA Marine Equipment and Systems and CEO of SKF GmbH.  "Even if there is still insufficient capacity utilisation in parts of the industry now,  the increasing orders for new ships give more than hope for 2021 and 2022," he  adds. "We have learned to respond flexibly to the needs of the pandemic."  

Production proceeding, but service and distribution activities hampered  by travel restrictions  

Despite the three Corona waves so far, production in the sector has continued  and orders have been processed. "This has been a major effort for the  employees and the management for more than a year now. The establishment  of new shift models, partially ineffective home offices and necessary  organisational measures have significantly increased costs," explains Dr Bernd  Sitte, member of the board of VDMA Marine Equipment and Systems and managing director of Dipl.-Ing. H. Sitte GmbH & Co. KG. International  quarantine restrictions are also a problem for service and sales staff.  Commissioning and new contracts are delayed. "Here, politics must enforce international solutions in the recognition of vaccinations (digital vaccination passport) as quickly as possible. Our export economy needs this flexibility and  speed," explains Sitte. At the same time, digital solutions are being further  developed and expanded in the companies. Digital teleservices, such as remote  commissioning and maintenance for international customers, have increased  significantly and function perfectly from a technical point of view. At the same  time, it is important here to recognise the legal effects and formulate them in a  binding manner.  

Turnover drops by 4.9 per cent  

The German shipbuilding and offshore equipmenty industry, with its 63,000  highly-skilled employees (minus 2.5 per cent compared to 2020), recorded a 4.9 per cent drop in turnover to 10.5 billion euros last year due to the Corona  impact. Orders even fell by 10.9 per cent in the same period. After bridging the  order lull in manufacturing, the further outlook for 2022 is very positive with  increasing order intake in the current year 2021.  

Achieving climate targets with high-tech from Germany and Europe  Over 90% of transport services globally continue to be by sea. CO2-neutral  fuels and drive systems are the key to the maritime energy transition, and  research institutes, maritime equipment suppliers and political decisionmakers  are cooperating to develop long-term concepts. Green hydrogen and the resulting power2X energy carriers are the solution, particularly also for  intercontinental cargo transport, yet they will not be available on the requisite  industrial scale before 2035, even according to optimistic scenarios. LNG  (Liquid Natural Gas) and other intermediate products will be needed. However,  German marine and offshore equipment suppliers are not only the “enablers”  that implement ideas as innovations – they also contribute solutions in all  maritime areas to make shipping cleaner and more competitive. Topics here are  operational and route optimisation, life-cycle costs, systems for ballast water  treatment and lubricating oil recycling, efficiency gains through predictive  maintenance throughout the entire life of the ship.  

The industry is also successful in the construction and supply of offshore wind  turbines. "For the planned offshore wind turbine projects around the world with  their hundreds of gigawatts of capacity, a great many new installation and  service vessels will be needed. Here we see very good opportunities for the  German supply industry and also the shipyards," Martin Johannsmann points to  the future of the industry. 

Success with digitalisation in the competitive international market  In addition to the markets for new special ships, it is also always a question of  the rapid technical modernisation of the often outdated global fleet in terms of  efficiency and environmental protection. German shipbuilding and offshore  suppliers deliver their components and systems to all types of ships. "The  industry is heterogeneous; there are small and large companies, broadly  positioned and very specialised firms. However, maritime machinery and  equipment manufacturers are always characterised by flexibility and innovative  strength," Johannsmann explains. At the moment it is particularly important to  win new markets and to adapt and expand one's own products and services for  further customer groups. In the current situation, it is becoming increasingly  clear that digitalisation is the main driver in the maritime industry.  

Digitised products continuously provide data that, together with data from other  components and systems, bring previously undreamed-of results and open up  possibilities for action through the use of artificial intelligence (AI). Those who set the standard in this field have a competitive advantage. This is precisely  where Europe, and Germany in particular, want to lead the way. In mechanical  engineering, open interfaces based on the Universal Machine Technology  Interface (umati) are being defined for all sub-sectors. The joint efforts of the German maritime industry in drawing up the VDMA standard sheet on MTP  (Module Type Package) give the industry a head start. But other nations, above all China, also want to set the standard.  
Responding to China as customer and competitor  

In 2020, the German shipbuilding and offshore supply industry exported 14  percent of its production directly to Chinese shipbuilding. This share is expected  to increase significantly in 2021. In mechanical and plant engineering as a  whole, China has just overtaken the USA again as the number one export  market. At the same time, competition for the German shipbuilding and offshore supply industry will continue to increase in China and in export markets. To  secure a level playing field, trade policy instruments in Germany and Europe must be realigned. This involves, on the one hand, protecting the EU's internal market from subsidised competitors from third countries and, on the other, opening up markets in third countries. 

Indicators for marine and offshore equipment suppliers in Germany  

No. of employees: 63,000  
Sales (2020): €10.5 billion (2019: €11.1 billion)  
Export rate: 76%  
Decline in incoming orders: Down 10.9% on average for 2020  

Different trends in export markets: Other European countries remained a  major export market for German equipment suppliers (attracting 34% of  exports), thanks to the continued favourable order situation for leading  European shipbuilding companies in their particular special segments prior to  the pandemic, as well as a high delivery volume of European manufacturers  among one another for producing large systems for global shipbuilding. The  entire Asian region claimed 34% of German equipment exports in this period. Of  the main Asian countries, China’s share of exports of German equipment  suppliers diminished to 18.1%, whereas Korea’s share edged up to 9%. The  situation will probably change in China’s favour in 2021.