WORLDWIDE SHIP REPAIR

The health of the world's shiprepairers is inextricably linked with the fortunes of the world's shipowners: when it's bad for the owners it's bad for the repair yards. The long recession has had a marked effect on the shiprepair yards around the world, but at long last there seems to be a glimmer of hope of the long awaited upturn in the market. Although most repair yards will take between 18 months to two years before they feel the upswing, increased activity is now developing in several areas.

The demise of the large tanker has been well chronicled, a factor which hit the large repair facilities around the world. Anticipated growth in the dry bulk trades did not materialize and therefore did not generate compensatory shiprepair demand. The arrival of a number of new facilities onto the market has increased competition in certain areas. Added to this are developments of planned maintenance condition monitoring and performance, high technology hull coatings and the Classification Societies willingness to extend Survey periods, all of which have led to drydocking intervals being increased with a proportionate decrease in opportunities for repair yards.

However, there are now certain signs for encouragement.

Increasing labor costs in a few traditionally lowest-cost areas are causing some shipowners to look elsewhere resulting in benefits for yards in other areas. Increased government support in some Western nations is beginning to pay dividends and, of course, the United States is in more than a comfortable position.

The U.S. Navy, over the next five years, plans to spend $105 billion on new ship construction, ship conversion work and ship overhaul work alone. (Total planned U.S. Navy expenditures— including weapons, other systems, production and development— over the next five years is $230 billion.) The bulk of the $105 billion ship work will go to the private sector with $30 billion of this earmarked for overhaul work.

The Far East is still the world's leading shiprepair center, although yards in Singapore are finding the going a bit tough, with Japan and Korea still competing on the basis of price. In the Philippines, the recent re-scheduling of the country's IMF loan is expected to see Philseco more active on the international scene this year. China is the biggest unknown quantity at the moment.

It has made great gains in the shipbuilding league. Although it has yet to become active in the shiprepair market, it seems only a matter of time before it becomes a major force to be reckoned with. Meanwhile in Northern Europe and the United Kingdom the theme has been reorganization and rationalization.

Although most repair yards have set tariffs for work, these are very often ignored, with yards treating each individual inquiry on its own merits. The Far East is still the least expensive repair area (with Korea being the least expensive country), sometimes 40 percent less than European yards. But with the levels of State-support now available in some Western countries there is a growing awareness on the part of owners that it is sometimes more realistic to repair outside the Far East. One contract for a large scale jumboization last year went to a European yard at the eleventh hour because it had quoted "10 percent under the lowest bid received" by the shipowner so far. A Far East yard lost this order. High labor costs in certain countries pose another problem.

Even yards in Singapore are now feeling the effect of increasing costs for labor. While many yards have embarked on productivity-increasing exercises as well as investing in labor-saving devices, shiprepair IS a labor-intensive industry and will always remain so. With labor costs now accounting for more than 50 percent of a shiprepairers total costs, many yards in high cost areas are unable to compete with yards in the low cost areas on runof- the-mill type repairs. They have, therefore, switched their attention to the more sophisticated end of the market, ship conversions and major damage repairs. More yards and facilities are planned to open this year and in 1986. Due to enter service this year are docks in Colombo, Sri Lanka; Punta Arenas, Chile; San Francisco, California; Bandar Abbass, Iran; while other new facilities are set to enter service next year and the year after in Algoa Bay, South Africa; Melbourne, Australia; Madras, India and Jenjen, Algeria.

There is a difference of opinion in some quarters regarding these new additions. One view is they are the result of an anticipated increase in repair activity, while another holds they could result in increases in national protectionist policies if the anticipated increase in repair activity is insufficient.

This article examines each major shiprepair area in detail, outlining its policy changes over the past 12 months as well as highlighting significant developments during the past 12 months.

THE FAR EAST The yards in Japan, Korea, Hong Kong, Singapore, Malaysia and the Philippines have held onto the position of the number one shiprepair area in the world, but the leading shiprepair nation for the past few years, Singapore, saw shiprepair revenue decline for the fourth year last, vear.

Singapore: The repair yards in Singapore now face an overcapacity situation, a fact which they recognize and are working to correct. The government seems not to be too interested in getting involved directly with its shiprepairers' problems.

Five yards in Singapore have diversified into other non-marine related activities, and most have embarked on investments in laborsaving devices. The yards also face a labor shortage, which could be a problem when the market does pick up. Keppel is proving the exception to the rule, with good success with large ship conversions.

Hong Kong: The British Crown Colony's major repairer, Hongkong United Dockyards Ltd underwent a major streamlining exercise last year, both in its management structure and yard structure. The restructuring seems to have worked.

According to new commercial manager Y.C. Chiu "our pricing is now very competitive and good occupancy levels of our three floating docks are being achieved as a result. When this new pricing structure is combined with our reputation for good quality, the yard becomes an attractive package for any owner trading to and from the Far East and seeking value for money." In the three months, September, October and November last year, HUD drydocked a total of 60 ships for a number of prominent international owners, including Zim Israel, Nedlloyd Lines, and A. P. Moller. The offshore market is another area in which HUD sees a great potential, both for rigs and offshore support vessels. It has already had some success in this area, repairing semi-submersible rigs for Chinese and Western owners as well as OSVs.

Japan: Still holding the world number one position in shipbuilding, the Japanese shiprepair yards have been fighting an uphill battle with their neighbors, South Korea, during the past year, particularly with regard to prices. Figures released by The Japan Ship Exporter's Association for fiscal 1983 shows the total value of shiprepair work booked with local yards amounting to 203.8-billion Yen, down from the 1981 peak of 324.4- billion Yen. The JSEA blames this slump on Korean competition and the downward trend in domestic repairs, although there was also a drop in repairs to foreign flag vessels in Japanese yards. The Shipbuilders Association of Japan's repair index puts Korea as the cheapest country by far to repair in the Far East, followed by Taiwan, Singapore and then Japan. If this situation continues, says the SAJ, the position of Japan's shiprepair yards will be further eroded.

While not being in a position to compete with the cheaper yards in the area on the "wash and brushup" type of repairs, Japanese yards have carved out a particular niche in the market for themselves; large scale conversions (particularly of containerships). With the large number of newbuilding contracts placed in the past couple of years for the latest generation of containerships, many owners with aging existing tonnage have been left with a difficult decision. "Do I newbuild to stay in the race or do I convert?" Many owners have chosen the latter, with the lion's share of this business finding its way to yards in Japan. These conversions fall into two categories: jumboizations and lengthening and re-engining work.

With many of the larger older containerships being steam turbine propelled, the latest generation of fuel efficient diesel engines have made re-engining work more and more attractive. One major contract to find its way to Japan was Sea- Land's 12-ship D9-class of containerships, which are all being lengthened by Mitsubishi Heavy Industries.

Japanese tanker owners have also been active in the conversion market, mainly on the re-engining side.

On the yard facilities side, local yards have embarked on large-scale facility upgrading programs and automation programs. Hitachi Zosen started the ball rolling with the Kanagawa facility. This automation program is now being extended to docks at its Osaka and Hiroshima facilities. Kawasaki Heavy Industries and Imabari Zosen, on the other hand, ordered new floating drydocks during the year. Kawasaki's dock will be 230m length, 43.2m beam and will be capable of accommodating vessels of up to 59,000 grt, while Imabari's dock will be capable of accommodating vessels of up to 53,000 grt. Kawasaki's dock is ex- pected to enter service at the beginning of next year, while Imabari's will start operations at the end of next vear.

Philippines: The only major shiprepair facility in the Philippines is the Philseco yard at Subic Bay which opened in 1982. This yard has yet to make a major impact on the international repair scene, but this year it is expected to pull in more overseas business, due to the rescheduling of the Philippines IMF loan. While relying heavily on domestic-flag vessels, this Kawasaki Heavy Industries-managed yard, has seen a number of U.S. owners stemm ships, notably U.S. Lines, American President Lines and Central Gulf.

On the new facilities front, the new offshore fabrication yard being built by Atlantic, Gulf and Pacific Co of Manila Inc, at Batangas Bay, 126 km south of Manila, is to have a 5,000 dwt capacity slipway and broadside marine railway for re- pairs. Major customers expected are offshore operators. AG&P's earlier plans to have a large floating dock and graving dock were shelved due to the depressed market. This slipway and marine railway will come into operation sometime this year and will provide competition for the smaller Philippine yards such as PNOC, Keppel Philippines, Bataan Shipyard, etc., which mainly rely on the local inter-island traders and offshore vessels.

Malaysia: Just across the Straits of Johore from Singapore lies Malaysia's largest shipyard, the Malaysia Shipyard & Engineering facility at Johore Bahru. Being so close to the Singapore yards, MSE is a major competitor. Quoting prices slightly cheaper than the Singapore yards, MSE has managed to pull in some tanker-to-storage vessels conversions during the past 12 months, notably on Indian vessels, as well as some major reactivation contracts on large tankers coming out of layup.

Meanwhile over in East Malaysia, the A&P Appledore-managed Sabah Shipyard has pulled in a steady flow of repair work, mainly from local coastal vessels and offshore support craft, but as this yard is also a newbuilding yard, new orders have really been the highlight during the past 12 months.

MIDDLE EAST The shiprepair scene in this important area has come on in leaps and bounds during the past few years and now is a major repair center.

At the moment though the Iran- Iraq war is taking its effect on all of the yards, both in the large and medium size facilities.

Kuwait: Situated the closest of all to the war, the Kuwait Shipbuilding & Repair Co has been having difficulties of late, but its diversification into land-based areas has definitely helped business. The yard is now embarking on an entirely new pricing policy in shiprepair work which is expected to produce positive results in a relatively short time.

Bahrain: This group of islands has been the focal point of Middle East shiprepair activities for a number of years now as it had the only large repair facility in the Gulf in the shape of Asry, until Dubai Drydocks opened up for business. The downturn in large tanker repairs has caused Asry to look elsewhere for business, and this it has managed to do very well, maintaining its dock occupancy rate and pulling in a wide variety of tonnage, including rigs.

The smaller yards in Bahrain, such as Bahrain Slipway and Basrec have still been kept busy by their traditional customers, as well as by the offshore customers.

Dubai: Since Dubai Drydocks entered service a couple of years ago its success has escalated, with this A&P Appledore-managed yard now being one of the most highly respected in the world. But its three massive drydocks could accommodate more work. 1984 saw the yard make a small profit, which is a rather good achievement considering the market. Dubai Drydocks, like Asry, has also been affected by the Iran- Iraq war, as well as by the drop in large tanker repairs, but it too has also managed very well to pull in a wide variety of vessels, including rigs.

Saudi Arabia: 1984 saw the entering into service of the second new Saudi repair yard: the King Fahad Ship Repair Yard in Dammam. Like the Jeddah yard on the Red Sea, the Dammam yard is equipped with two medium size floating docks and a modern array of workshops, etc. Although only having worked in smaller local flag vessels since starting up operation in September, the Dammam yard has set its sights on vessels using the Dammam port as well as on the Saudi merchant fleet, both of which offer substantial potential for more work.

THE MEDITERRANEAN The shiprepair yards bordering the Med (Greece, Southern France, and Malta) have seen a newcomer arrive on the scene at the start of this year, and a yard which is providing a great deal of competition: Gibraltar Shiprepair Ltd. Another A&P Appledore-managed yard, Gibrepair took over the former H.M. Naval Dockyard on January 1st, and since then has been doing brisk business. The yard's newly refurbished No. 1 dock (75,000 dwt capacity) entered service at the end of May and the yard is now fully operational. Proof, again, that sound management definitely pays dividends.

Greece: The Neorion yard on the island of Syros continues to do well with a steady flow of good reports regarding activity. However, other yards in Greece have been trying to sort out their difficulties during the the past 12 months, particularly labor problems in the Piraeus, Skaramanga area, but no firm details are yet known regarding progress.

Italy: Having just reorganized its shipyards into one state body, the Italian repairers must be eyeing Gibrepair with keen interest as they are this yard's major competitors.

The former CNR yard in Palermo, now run by Cantieri Navali Italiani, had a relatively good past 12 months, increasing its drydockings by a massive 100 percent, with 50 percent of all foreign flag vessels drydocking in Italy during the period July 1983-June 1984 being stemmed in Palermo.

Algeria: The green light has finally been given for the establishment of a new repair facility at Jenjen in Algeria. OAPEC has decided to go ahead with this project. The new yard will be equipped with two drydocks of 70,000 dwt and 150,000 dwt capacity respectively. This yard though, is expected to be used by the Algerian fleet solely.

Tunisia: The former French Naval yard at Menzel Bourguiba, now run by Tunisia's Socomena, is soon to undergo a major upgrading exercise which will also increase its newbuilding potential.

UNITED KINGDOM The privatization of the shiprepair yards under the British Shipbuilders banner is now almost complete, with Vosper Shiprepairers alone remaining. March finally saw the long-awaited decision on the new owners of BS's "jewel in the crown," Falmouth Shiprepair. After much debate, Falmouth is now owned by a company made up of A&P Appledore and Bellway, with managing director Denis Pascoe staying on.

Another former BS repair yard now privatized, Tyne Shiprepair Ltd, has turned years of loss-making activities into a profitmaking first 12 months of operation. But unfortunately another former BS yard, Readhead Shiprepairs Ltd on the Tyne, has gone under and has been bought by Tynedock Engineering Ltd. Down on the South Coast, Thames Shiprepair Services in Chatham are still operating, but the decision as to whether they will still be allowed to operate out of the former Royal Dockyard has yet to be taken.

NORTHERN EUROPE The yards in France, Holland, and West Germany have all been involved in restructuring programs during the past year.

France: The two major yards in Dunkirk and LaCiotat have been grouped under the same company, while the future of Le Havre's AFOA still hangs in the balance after serious financial problems.

Holland: The Dutch repair industry has seen another casualty this year, the large Amsterdam Drydock yard, which followed Rotterdam's RDM into bankruptcy. The Government refused to provide further financial aid to ADM earlier this year and the yard was declared bankrupt in February. A rescue plan is currently being put together. Other Dutch yards are also having difficulties, and there are fears of further casualties.

West Germany: Re-structuring has also taken place in Germany, with a number of yards joining together, notably Bremerhaven's Hapag Lloyd Werft and Bremer Vulkan.

Hamburg's HDW is waiting for the final go-ahead on the massive conversion contract on the passenger liner 'United States'. HDW says it is confident of winning it.

SCANDINAVIA The situation in the Scandinavian countries is basically the same as that in Northern Europe, although the lack of direct government support, coupled with high labor costs has affected all.

Sweden: The giant Cityvarvet group, with yards in Gothenburg, Landskrona, Malmo and Solvesborg, has been having some difficulties and has just placed its large floating dock at its Gothenburg facility on the market at a price reported to be somewhere in the region of £25 million. The Cityvar- vet group is increasingly relying on Scandinavian owners and Baltic traders for work, as well as the sophisticated end of the market.

Denmark: Here, once again, the domestic owners and local traders have provided the mainstay of work at the likes of Aalborg Vaerft, Fredrikshavn Vaerft, etc.

Finland: New facilities coming into operation at Wartsila's Turku yard, a new floating dock of 8,500 ton lifting capacity, and the remodeling of Valmet's large newbuilding dock in Helsinki, into both a shipbuilding and repair facility capable of accommodating vessels of up to 60,000 dwt for repair, have been the highlights of the year. This dock is being aimed at the jumbo-ferries now running between Finland and Sweden, as well as the large ro-ro/ containerships in the Russian fleet running out of Leningrad.

SPAIN & PORTUGAL The restructuring of the shipbuilding and repairing industry in Spain is still underway, with the most likely outcome being that shiprepair activities will be centered around the northern and southern parts of the country. The large Astano facility at El Ferrol in the north is now looking towards the offshore construction and repair market as well as the conventional shiprepair market.

Meanwhile, in Portugal, the prob- lems facing the country's largest shiprepairer, Lisbon's Lisnave, are being resolved. After facing the possibility of closure, Lisnave is currently in the process of trimming back its large workforce in an effort to streamline its operations. This is expected to be completed by the middle of this year with a strong possibility for renewed vitality.

While Lisnave has faced problems, the large Setenave facility at Setubal, south of Lisbon, has been doing relatively well pulling in repair work. Better known as a shipbuilding yard, Setenave (which split from Lisnave last year) has attracted a number of owners to repair at its giant facility in Setubal.

NORTH AMERICA One of the most significant factors in this part of the world during the past 12 months has been the change in the structure of the Canadian repair industry.

Canada: Halifax Industries two yards in Nova Scotia, Halifax Shipyard and the smaller Dartmouth Slip, were declared bankrupt at the end of last year, and are currently awaiting sale. The yard is still repairing ships while waiting for new owners. Eight domestic companies are believed to be interested, after Japanese and West German principals pulled out. Meanwhile, Davie Shipbuilding in Lauzon, Quebec, has been taken over by the Versatile Corporation (owners of West Coastbased Burrard Yarrows), making Versatile one of the largest shipyards groups in Canada.

United States: The American shiprepair yards are busy with continuing work from the U.S. Navy, Military Sealift Command and MarAd. The volume of work being supplied by these three parties is so great that a number of yards have had to embark on large-scale upgrading plans to cope with the volume of business. The commercial repair market in the U.S. is still declining, as U.S.-flag owners find ways of repairing vessels overseas.

There have also been casualties with over 10 yards of various sizes closing down in the past two years. Foreignflag repairs are still scarce at U.S.

yards, mainly due to the high prices being quoted. Business realistically available from overseas owners comes from passenger/cruise vessels operating out of U.S. ports and casualty work.

On the new facility front, new docks have come into operation at Bath Iron Works (Portland, Maine), Braswell Shipyards (South Carolina), Jacksonville Shipyards (Florida), North Florida Shipyards (Florida), Todd Shipyards (Los Angeles), Southwest Marine (San Diego) and NASSCO (San Diego).

Meanwhile, San Francisco's Continental Maritime has ordered a large floating dock from GHH of West Germany which will start operation in the summer of this year and Bethlehem Steel is to open a new offshore rig repair yard at Sabina Island, near Port Arthur, Texas.

With $6-billion budgeted by the U.S. Navy for repairs and modifications last year, and 40 percent of I this going to U.S. commercial yards, I coupled with $319-million to be spent by the Military Sealift Command this year on conversions and repairs, the U.S. repairers have a very healthy market to tap into. The only problem for the U.S. yards, though, is that when the upturn in the market does come about, there could be a shortage of docks in certain areas of the country, a happy situation for dock builders. Another problem is that of productivity. One leading U.S. yard has tied-up a technology- exchange agreement with Japan's Mitsubishi Heavy Industries to improve its productivity levels, especially on the ship conversion front.

In all, thanks mostly to the U.S.

Navy, Military Sealift Command and MarAd, the U.S. repair sector can look forward to five years, at least, of very healthy activity with $30-billion slated for overhaul work alone during that period.

At present, the U.S. Navy, Coast Guard, M.S.C., MarAd and other U.S. government agencies operate approximately 4,000 vessels. Most of these must be repaired and maintained in U.S. yards. In addition, excluding the 1,828 U.S. owned and controlled deepsea commercial ships (which can be repaired overseas), there is an additional fleet of 21,716 domestically trading selfpropelled commercial vessels plus 22,396 barges in the U.S. These must be maintained in U.S. yards.

An existing fleet of 4,000 U.S.

government vessels plus 45,000 domestic commercial vessels adds up to a respectable and continuing U.S. maintenance and repair potential.

SOUTH AMERICA Brazil: The situation with Rio de Janeiro-based Renave is still uncertain after this yard was declared bankrupt. Buyers are still being sought. It is more than reasonable to assume a country such as Brazil should be able to support a major shiprepair facility, especially when you consider the expected growth in iron ore exports from that country.

Chile: The country's leading shiprepairer, ASMAR, has recently increased the maximum size of ship able to be docked at its No. 2 drydock at its Talcahuano yard. This dock can now accommodate vessels of up to 90,000 dwt and will be capable of meeting the increasing and encouraging demand for large docking facilities in this country, especially from foreign-flag vessels. ASMAR is also involved in the building of a new small ship repair facility at Bahai Catalina, near Punta Arenas.

This new yard, being set up jointly with South Africa's Sandock- Austral, is to be equipped with a marine railway and a land-side transfer system. Opening is set for the middle of next year. Generally, yards in Chile are optimistic and looking ahead to new growth in activity.

Colombia: "CONASTIL" (Compania Colonbiana de Astilleros Ltda) shipyard, located in the Caribbean port of Cartagena, Colombia, offers a full service facility to owners trading in the Caribbean or transitting the Panama Canal. The yard has a brand-new syncrolift system capable of accommodating vessels of up to 130 meters LOA. The yard also has eight land positions, thereby always having a drydock available on arrival. The yard has all new ships (electrical, machine, steel, etc.) and equipment and can affect all types of shiprepairs efficiently and at very competitive prices. Recently the yard successfully completed a major conversion/lengthening of an oil tanker and are presently building several tugboats for a northern Colombian coal port facility.

The future for world shiprepair is, of course, assured as ships will always need to be repaired.

Activity is increasing in certain areas and there is cautious optimism regarding an increase in work levels expected in the next 18 months or so.