Shipbuilders Vie for Position

With a glut of ships on the market and cash-strapped operators, shipyards are having a tough time finding work. Competition is fierce, and price-cutting common. China seems to hold the upper hand, especially on price, while traditional shipbuilding powers like Korea and Japan are refining their strategies. Meanwhile, countries like Vietnam are benefiting from the offshore boom.

“I do not see China as a threat,” says Hiroshi (Dave) Iwamoto of shipyard Japan Marine United’s planning department. Iwamoto should know. He also represents The Shipbuilders’ Association of Japan and is Chairman of the multi-nation Committee for Expertise of Shipbuilding Specifics.

“When Japan was strongest,” he explains, “they were leaders both in production and technology, enjoying volume-oriented benefits as well as technological superiority. But we no longer have both, and this is why Japanese shipbuilders do not aim to expand capacity beyond what they can achieve from increases in productivity, a good lesson we learned from the past. The way the Chinese have entered the market – with the aim to enhance capacity – is a natural approach, and the way we are to proceed is not by competing in terms of capacity but rather from a quality point of view. When China learns its lesson from an over-reliance on capacity and concentrates on quality, this is the time when we need to tighten our reins. But this may not come so quickly.”

Iwamoto was heavily involved in the merger that resulted in the formation of Japan Marine United in January. Its shareholders are JFE, IHI and Hitachi Zosen. Speaking more generally of trends in the industry, he says: “We feel that a merger is one variation of utilizing our resources, and similar results are possible with other types of business models, such as alliance, or joint production by division of role and responsibilities. In the shipbuilding industry, because of its rapid growth in recent years and with many aged people retiring, there is a fundamental problem of skilled people shortage, and it is not possible to have these people in every shipyard. The business models will probably focus on this area.”

Earlier this year, Mitsubishi Heavy Industries and Imabari Shipbuilding demonstrated the alliance model, establishing a joint venture, MI LNG, to handle the design and marketing of LNG carriers. With the shipyards of the two companies at its disposal, the JV will be able to take orders for multiple carriers, putting it in a position to compete with Korean and other large shipbuilders. As well as conventional Moss and membrane tanks, the JV offers its Sayaendo design – a new-generation LNG carrier that has a peapod-shaped continuous cover over spherical LNG tanks to improve efficiency and reduce overall ship weight and size.

Opportunities in Offshore
One sector that is not suffering is the offshore workboat market. The French-led Piriou shipyard group recently celebrated its 100th crewboat delivery, the aluminum, in-house- designed fast passenger and supply vessel Bourbon Shamal. The vessel was delivered from the company’s shipyard in Vietnam. Piriou also has yards in France and Nigeria but has opened a second yard in Vietnam this year as the country offers the potential to produce vessels at competitive prices and with very tight turnaround times.

Vietnam has a growing offshore industry, and shipbuilding is benefitting. London Offshore Consultants (LOC), a leading global marine and engineering consultancy, recently opened a new office in Vietnam managed by Kenny Ong. “Vietnam is one of the most exciting developing countries in Southeast Asia,” he says. “The potential for the oil and gas industry is enormous.” The new office is located at Vung Tau, a growing base for offshore activities with booming ship and fabrication yards. “Vietnam has one of the world’s longest coastlines with high oil and gas potential,” adds Ong. “In the long term, we believe the Vietnamese oil and gas sector will open up more with a greater need for overseas expertise and the development of local technical capabilities.”

2012 saw some top management changes, including a new CEO, at Jaya Holdings, a leading shipyard and offshore operator based in Singapore. Jaya has delivered five anchor-handling tug supply vessels (AHTSs), two DP-2 ROV support vessels and one multi-purpose maintenance vessel in the past 12 months. Its current building program consists of nine vessels with six in advanced stages of construction and three in the design stage.

Lim Siew Koon has headed Jaya’s shipbuilding and ship repair division since November 2007: “Jaya has emerged stronger after the financial crisis. The shipbuilding division is transforming rapidly from a reputable international builder of vessels on a stock basis to one of high-value, custom-built offshore support vessels (OSVs).”

He says the current offshore support vessel newbuilding market is picking up, though buyers are still very price-sensitive: “Moving ahead, with delivery of many rigs and increases in offshore oilfield exploration and development programs in deeper water, the demand for newbuild OSVs with better capability will rise. The likelihood of retiring of older tonnage will also pick up speed. Buyers are demanding vessels with features such as better DP capability, more lifting capacity for subsea work, multi-purpose capability for deck and cargo handling and oil spill recovery, low fuel consumption, and crew comfort. With our 16,000 BHP AHTS, we developed a lot of new design features, which we can and will apply innovatively in future projects. We will be looking forward to furthering our knowledge base of ice-class design and deepwater capabilities.” 

Jaya has big plans. “We are definitely planning to enhance our shipbuilding capability – especially at our Batam shipyard in Indonesia,” says Lim. “We planned to do so in 2007 but held back in order to pass through the global financial crisis. Now we will be looking at equipping our Batam yard to build more sophisticated vessels, increase work efficiencies by reducing the effect of weather on vessel construction, and introduce new equipment. We need to ensure a balance between automation and operating in a low-cost labor environment to achieve perfect cost-effective, efficient shipbuilding.”

The offshore wind market is a niche that a number of shipyards around the world are exploiting. With the delivery of turbine installation vessel Bold Tern, UAE-based Lamprell has now completed five such vessels. Bold Tern and sister vessel Brave Tern are the largest vessels ever built by the yard.

Damen Shipyards Group has just delivered two catamarans to SeaZip Offshore Services for deployment in North Sea wind farms. The vessels feature Damen’s Twin Axe hull form, designed for high stability and fuel economy. Damen predicts that the offshore wind industry will shift towards locations over 20 km from the coast over the next few years, necessitating vessels that include accommodations, such as in the newly-delivered Marineco Thunderbird, another Twin Axe design.

Offshore and Military Bolster U.S. Market
The U.S. market for Jones Act-compliant offshore vessels is growing fast with the revitalization of deepwater drilling in the Gulf of Mexico. Hornbeck Offshore has ordered up to 20 new high-spec OSVs to be built at two Gulf of Mexico shipyards, and Harvey Gulf is in the midst of a newbuild program that includes the first LNG-fuelled OSVs, to be built at TY Offshore. BAE Systems shipyard in Florida is constructing four platform supply vessels (PSVs) that will support offshore oil and gas drilling in the Gulf of Mexico, and LEEVAC Shipyards has two in-house-designed PSVs underway for Tidewater Marine with an option for two more.

The demand for patrol boats is strong due to piracy and terrorism threats faced overseas, says the CEO of Swiftships, Shehraze Shah. Swiftships has recently delivered two patrol boats to Iraq and is also building vessels for Egypt. Moose Boats has delivered a patrol boat to the San Francisco Police Department that is suited for service against terrorist threats and natural disasters, while Bollinger has delivered the Fast Response Cutter Margaret Norvell to the U.S. Coast Guard.

Austal USA’s order backlog has grown by $681.7 million as a result of two additional Littoral Combat Ship (LCS) contract options being exercised by the U.S. Navy. The vessels are the fifth and sixth ships in the 10-ship block buy. Austal has also been contracted by the U.S. Navy to build ten Joint High Speed Vessels under a 10-ship, $1.6 billion contract, one of which has already been delivered.

LNG and Bulk Carrier Markets
The LNG and LPG carrier market is also expanding in anticipation of increased exports from Australia and the U.S., not to mention the Middle East and even Africa. Nonetheless, there is reason for caution. Drewry Maritime Research reports that the major concern for shipowners is that insufficient liquefaction capacity will be added during 2013-15 when most of the new vessels ordered in the last couple of years are scheduled for delivery.

Global Hunter Securities has voiced concerns over the bulk carrier market despite a slowing of deliveries. The sector still needs time to absorb four years of oversupply, it cautions. More worrisome still is that newbuild ordering has picked up again as owners try to put capital to work at what is widely seen as the bottom of the cycle.

Eco-Ship Deliveries Increasing
Many yards are coming to terms with anticipated environmental regulations through the delivery of greener vessels, known in the trade as “eco-ships.” Greece’s Almi Tankers took delivery of the Almi Sun and Almi Explorer from Daewoo Shipbuilding & Marine Engineering Shipyard (DSME) in Korea in March. The ships have electronically controlled main engines and slightly larger propellers with pre-swirl stators to enhance efficiency. Malaysian-based AET took delivery of an eco-design VLCC from DSME with a ballast water treatment system from Techcross and an Energy Efficiency Design Index significantly lower than IMO’s base line.

Lloyd’s Register classed Alexandros and Aristotelis, the first of five new 5,000 TEU containerships to be delivered from Hyundai Heavy Industries’ Gunsan shipyard to Athens-based Capital Shipmanagement. The vessels are equipped with high-efficiency engines suited to slow steaming and alternative marine power systems to take advantage of shore power in port. Maersk’s Triple-E, the largest container ship ever built with CO2 emissions reduced by more than 50 percent per container moved, will join the green shipping ranks in mid-2013.

More environmental developments are expected in the future with the Materials On-board: Steel Advancements and Integrated Composites (MOSAIC) project. Project partners Fincantieri and Lloyd’s Register, among others, are investigating the use of special high-strength, low-alloyed steels and composites to reduce ship weight and therefore fuel consumption. The project is just commencing but in a year’s time should start impacting the industry.