Wednesday, November 05, 2008
Mark Warner - Wednesday 5 November 2008
ESTABLISHED shipyards in the Far East are set for a much-needed double boost in the next year, as new yards come under increased financial and regulatory pressures, and falling steel plate prices lower production costs.
A race for the crown of premier shipbuilding nation, and an unprecedented appetite for new ships, has seen a massive expansion in the number of Chinese yards. Tonnage is set to treble between 2007-2010, but this has given rise to a wide disparity in yard quality.
“There is a massive gulf between recently built world-class facilities to yards with practices that belong at the beginning of the 20th century,” said Lloyd’s Register fleet services manager Iain Wilson.
“But I think reports of over 5,000 yards in the country are optimistic and the top 40 or 50 yards still account for over 80% of tonnage.”
Speaking at the Lloyd’s Shipping Economist ship finance conference, Mr Wilson cited a number of quality problems at greenfield yards, such as fires caused by welders working in recently painted spaces, unauthorised welding repairs and failed casting.
Government restrictions on shipbuilding were also starting to have a direct impact on the operations of smaller yards where skilled labour was in short supply and many are now struggling with refund guarantees.
“The next few years will be critical as there is a severe shortage in skills and training at smaller yards, and any closures will help improve management skills in surviving yards,” Mr Wilson said.
“The economic situation and a rise in the number of cancellations will mean that only well-managed yards that meet regulations and have required trained staff levels will survive.”
Surviving yards will also reap the benefit of declining steel plate prices that will bring down ship production costs.
“Steel plate prices saw a rapid rise through the first half of this year thanks to strong demand and a lack of import conditions that allowed producers to rise prices,” said John Kovacs, principal consultant at mining and metals consultancy CRU Group.
“But over recent months we have seen an equally rapid fall in prices as industrial production has been hit by credit problems and financial instability.”
Steel plate demand remains strong in shipbuilding due to the full orderbook with an increased global plate demand from 6% to 8% with predictions that shipyard demand will surge by over 30% in 2009.
“The decline in steel plate prices will continue into 2009 and this will only benefit the shipbuilding industry,” Mr Kovacs said.