Page 26: of Maritime Reporter Magazine (June 1991)

World Shipbuilding & Repair (continued)

Scrapping Down

The broken-up tonnage in 1990 was negligible, totaling just over 1 million gt for all vessels types. The apparent shortage of construction capacity, and high prices, have pro- vided a strong incentive to owners to prolong the lives of existing ships.

With only an estimated 0.25 million gt of tankers broken up in 1990, there is clearly a significant increase in the average age of the tanker fleet. However, environmental is- sues and legislation, particularly in the U.S., are expected to focus atten- tion on this aspect and the economic viability of older ships.

Laid-Up Tonnage

Levels Off

The fall in total laid-up tonnage appears to have bottomed out in 1990 following a continuous decline since 1982. The end of the year total of 2.9 million gt was only 0.1 million gt down on the December 1989 total.

There did, however, appear to be a change in the proportions of vessel types making up this tonnage. Laid- up tanker tonnage continued to fall, ending the year at 1.6 million gt.

This was counteracted by an ob- served rise in dry cargo tonnage to 1.3 million gt.

The modest lay-up is put into perspective when noting that 2.9 million gt is only 0.7 percent of the total world fleet.

Fleet Growth

Increases in the total gross ton- nage of each of the tanker, dry bulk and general cargo/container vessel groups resulted in a rise of over 13 million gt in 1990. The total gross

Cross Tonnage Ordered Annually 1981-1990

Million gt 25 1

Estimated Percentage of Ship Repair Market Shares by Region

Region 1985 1988 1990 1993 1995

N. America 5.4 4.5 4.4 4.4 4.4

N. Europe 31.4 23.7 24.4 24.4 24.4

S. Europe 15.9 19.5 17.9 17.3 17.0

SE Asia 6.0 13.5 14.0 15.0 15.5

Japan 19.5 13.7 13.9 13.9 13.7

Far East 8.1 10.3 10.8 10.0 10.2

Mid East 0.7 2.0 2.1 2.5 2.6

Rest of World 13.0 12.7 12.4 12.4 12.3

Sourve: Drewry Shipping Consultants Ltd. !»! I9S2 1**3 1«M MB I9S6 !

Oil tankers •"""« Ore and bulk carriers (incl. ore/bulk/oil)

General cargo and container — Total (all types) tonnage of 423.6 million was 1 mil- lion short of the 1982 figure, the year of the highest fleet tonnage figures of the 1980s.

Between 1982 and 1990, there was a 19 percent fall in tanker gross tonnage, offset by a 12 percent and 6 percent rise in general cargo/con- tainer fleets, respectively. This 6 percent rise in the general cargo/ container fleet over 105 million gt represented a fourth successive year of gradual growth, resulting in an extra 5.6 million gt over these years.

The 12 percent increase in dry bulk tonnage, which has created a total tonnage of 133 million gt, turned around a four-year decline between 1985 and 1989, to such an extent that the fleet was almost back to its 1985 size.

Dry Bulk Orders

To Rise In 90s

Dry bulk carrier orders will rise substantially through the remain- der of the 90s, according to the re- port, Bulk Trade & Shipping to 2000.

Annual new construction orders for bulk ships should rise to an average of 16 million to 16.5 million tons throughout the 1990s. This com- pares favorably with figures from the 1980s, when orders averaged almost 10.7 million per year.

Based on current dry bulk ship construction prices, deliveries would be worth about $6.9 billion per year.

The report by Ocean Shipping

Consultants bases its forecasts on projected scrapping levels of aged tonnage and increases in certain bulk trade sectors.

Fleet Replacement,

Life Extension Work

To Continue

Analysis of the fleet age profile reveals that 25.8 percent is now in the 15-19 year age bracket and 34.1 percent in the 15-24 year bracket; in 1987 the figures were 15.3 percent and 21.3 percent. This means that fleet replacement and life extension programs will continue to be neces- sary throughout the 1990s. As there appears to be concerted action among major yards to maintain prices at current, if not higher lev- els, shipowners will incur substan- tial costs—and this leads to the inevitable conclusion that freight rates will have to increase consid- erably.

Ship Conversion

Sector Active

Over the last three years, con- tracts worth well over half a billion dollars have been placed with ship- yards for tanker life extension and conversion projects, according to the recently released report, "The World

Shiprepair and Conversion Market," published by Drewry Shipping

Consultants of London. Many own- ers are opting for conversion and life extensions in an effort to avoid ris- ing new construction costs and comply with new environmental regulations.

In particular, the report points out that at least 35 major tanker conversion contracts have been placed from 1988 to 1990. These vessels have an average age of 14 years. Most of these conversion contracts were placed with Far East yards, in particular, Singapore.

Over the same three-year period, 30 major contracts were awarded for containership conversions.

One of the most important mar- kets continues to be the passenger vessel sector. Although averaging less per contract, cruise and ferry conversions accounted for a major- ity of the revenue, representing about 38 percent of the gross turn- over in a 2-1/2-year period.

The Drewry report states that high dock utilization should con- tinue over the next few years, since ship conversion capacity is not ex- pected to rise during that period.

Ship Repair To Remain

Strong Into '90s

According to Drewry, because of increased safety considerations and environmental awareness in ship- ping, price will play a lesser role in determining repair workload distri- bution, while technical standards and competence will assume increas- ing significance. However, shipown- ers will still look for value in ship repair—the best quality at the low- est price—and the change of empha- sis is likely to be fairly subtle.

Nevertheless, those areas with a reputation for high quality work such as Northern Europe and Japan should find their cost disadvantage less of a competitive obstacle. With classification societies under pres- sure to improve standards, with legislation causing a reduction in drydocking intervals, and with an aging fleet requiring greater main- tenance, most of the negative influ- ences on ship repair which charac- terized much of the 1980s are set to increase activity in the next few years.

As the repair market expands, all major ship repair regions can expect an increase in their total workload during the next five years, with

Southeast Asia forecast to record the largest rise (although this will depend upon the availability of suf- ficient capacity and skilled labor).

The Middle East yards of the Per- sian Gulf are also expected to in- crease their share of the repair market over the period.

Drewry forecasts that Southern

Europe, the Far East and Japan will suffer a slight drop in market share.

Southern Europe's share will drop mostly from increased labor costs arising from the completion of the

EC single market and from a reduc- tion in governmental subsidies.

High inflation in the Far East and the uncertainties over labor rela- tions in Korea, and other political developments in China and Hong

Kong, are likely to reversethe growth in market share which the region has experienced in recent years.

Continuing labor shortages in Ja- pan will prevent it from exploiting the difficulties of countries such as

Korea.

Drewry also points out that be- cause of economic and political de- velopments in the Far East, some ship repair work is expected to shift to other regions, such as Germany and the Netherlands.

In the U.S., despite reductions in the defense budget, the Navy re- mains a key source of ship mainte- nance and repair work. Over the next three fiscal years, 1991-93, the

Navy plans to spend $25.7 billion for fleet maintenance and moderniza- tion.

On the commercial side, the de- cline in the U.S. workload and mar- ket share should be halted, with more cruise vessels utilizing U.S. facilities.

Gross Tonnage Completed Annually 1981-1990

Million gt 25" 20

NSI 1982 1183 1984 1985 1186 1987 1988 1989 1990 mmm Oil tankers — Ore and bulk carriers (incl. ore/bulk/oil)

General cargo and container — Total (all types) 28 Maritime Reporter/Engineering News