There have been many concerns over the world’s shipbuilding capacity, but for a long time no one seemed to ask the question whether there is enough ship repair capacity in order to maintain such a big and fast-growing fleet.
The answer to this question may not be straightforward, as it depends upon not only the productivity of yard facilities but also the scope of the repairs/maintenance work on each vessel, timing and many other hard-to-quantify factors. By focusing on a few vital factors, DNV has developed a possible scenario for the future demand for ship repair capacity.
Demand for increased repair yard capacity
Shipbuilding has never been so busy. The total orderbook has grown from an average of 2,500 vessels (around 80 million dwt) in the past decade into a staggering 11,000 vessels (some 570 million dwt), representing a growth of 340 per cent (or 610 per cent in dwt). Rapid trade development, combined with the increased need for seaborne transportation has provided a fantastic opportunity for owners, who started to earn unprecedented amounts of money and for obvious reasons were reluctant to scrap their old tonnage. Massive orderbooks and high volumes of deliveries, combined with almost no scrapping, have led to a substantial increase in the world fleet, which is now growing by an average of eight per cent per annum compared to 2.8 per cent in the 1990s.
The booming shipbuilding sector led many ship repair yards to convert into newbuilding yards. It is estimated that around 20–30 per cent of the repair capacity has been ‘lost’ as a result of these conversions. Although it is possible to convert a newbuilding yard into a ship repair one, this process is not an easy one. We will discuss this process in the following.
Another issue to bear in mind is that the world fleet is going through an up-sizing process, which means that newly built vessels are in most cases bigger. This will eventually require larger docks. A good example of this is container vessels, which over the past three decades have more than tripled in size. There are already 12 big container vessels (super post panamaxes) with a capacity exceeding 10,000 teu and another 177 are on order. Since these vessels cannot enter most of the existing VLCC/VLOC docks due to their higher draft, new docks will have to be built for them. One such dock is known to be under construction soon in Marseille, and this will mainly be used for the repair and maintenance of large container ships.
It is already difficult to book a slot in a repair yard. Many yards claim that the waiting time can be up to six months. This of course varies from yard to yard and also depends on the ship type. Nevertheless, the average waiting time is around two months, which means that owners have to think way ahead in order to fit the necessary surveys with their charter commitments.
DNV scenario to quantify the need
for increased capacity
Bearing in mind all of the abovementioned factors, we are most likely heading towards a substantially higher demand for repair yard capacity. In an attempt to quantify this need for increased capacity, DNV has carried out a study in order to develop a future scenario. The scope of the study was to estimate the workload of ship repair yards in the forthcoming years.
The scenario is based on a calculation of the world’s total fleet development. To calculate this development, we included existing and newly contracted vessels which are larger than 1,000 dwt and have been delivered since 1 January 1980. The study does not take into account the scrapping and delivery forecast after 2010, as we were only interested in the short- and medium-term future, which can be accurately assessed by the existing orderbook. The demand calculations take into account special five-year surveys (SS), intermediate 2.5-year surveys (IMS) and casualties. For each of the above, we have calculated an average time spent in a ship repair yard. Our calculations set 2004 as the reference point year where the applied index = 100. Our study was carried out based upon the number of vessels and GT.
The results were quite astonishing and in general proved our concerns to be justified. In the following part of this paragraph, all figures relate to the period between 2004 and 2012. We have noted a 34 per cent demand growth for ship repair capacity when counted by the number of ships. However, the problem begins when the scale is changed to GT. We have already mentioned the upsizing of the fleet and this is clearly visible in that the demand growth is 87 per cent in terms of GT! In absolute figures, this shows a growth from 210 to 390 million GT/ year or from 6.8 to 11.4 million GT/docking day.
It is also interesting to look at the different ship types. We have checked (in terms of GT) tankers, bulk carriers and container ships. The growth rates vary quite a lot and equal 114 per cent, 63 per cent and 161 per cent respectively.
The challenge – how to increase capacity?
As much as we are aware of the fact that our study is based on many assumptions and simplifications, we still believe that the shipping industry will need a lot of new ship repair capacity in the near future. This can be provided by either increasing the productivity of the existing yards or building new ones.
Increasing the productivity of the existing yards should ultimately result in shorter dry-docking times. Yards may, for example, try to increase their prefabrication capability by being able to construct bigger sections. The means of improvement would again be different for each yard, but they would all require time for implementation and undeniably substantial investments. On the other hand, when interviewing ship repair yards today, it becomes obvious that their existing workload exceeds their nominal capacity. To test out the effect of increased productivity, we developed a scenario involving a ten per cent reduction in dry-docking time, which in our opinion should reflect a situation in which the yards have implemented all possible improvements. Naturally, the outcome was a slightly lower growth in the demand for repair capacity, but the figures for the necessary capacity increase still remain high – over 50 per cent. This indicates that the future lack of repair-yard capacity cannot be resolved simply by increasing the productivity of the existing yards.
Many newbuilding yards may consider converting into ship repair yards. This process is indeed possible, but it would require a major shift in the operational model. Yards which in the past used to serve as repair facilities in general can be easily converted without too many obstacles. For them it would be a ‘back to the roots’ process.
Pure newbuilding yards, however, may find it more challenging. Those equipped with slipways are the most difficult to convert, as repairs can only be undertaken in dry or floating docks. Dry docks are generally considered the best ones for repairs, but floating docks are also being used, especially for the smaller tonnage. Facilities such as cranes, prefabrication sites etc. will not be problematic as they will have higher capacity than required for repair processes.
Another challenge, as already mentioned, is to change the operational model from long term (a few years ahead) to short term (which usually does not exceed six months ahead). The short term operational model will require several major changes, such as: different financing structure; adjusting and tuning productivity; changing procurement routines; and introducing the new ‘philosophy’ to staff not used to short time operations. The last change will require employing new specialists with knowledge and experience in repairing different engines, equipment and installations. Newbuilding yards, especially nowadays, are reduced to be ‘so called’ assembly yards, where most of the equipment is delivered from subcontractors, hence have very limited knowledge about their maintenance. Last but not least, such yards will have to heavily invest in marketing as they will have to develop completely new relationships, often with different clients.
Converting into repair yard facilities may also have positive effects. Short term financing greatly reduces exposure to the currency fluctuations and in general is easier to achieve. Also fully operational repair yards usually enjoy higher margins than their newbuilding colleagues. If we then shall believe in our demand forecast, we may expect some yards will try to expand or convert into repair activity.
DNV’s response to the challenge
DNV has developed several services which aim to help our customers in reducing the time spent on repairs.
Some surveys could be carried out before a vessel enters dry dock. The DNV class notation BIS (Bottom In-water Survey) is an example of this. With in-water survey, the vessel may even in some cases avoid dry docking every two and a half years (intermediate survey).
Another example would be the TMON voluntary class notation, which offers operators the opportunity to avoid withdrawing the tailshaft, if indications show that the propeller shaft stern tube bearing and systems are working satisfactorily.
The lack of experienced seafarers may lead to a vessel being maintained in a less than optimal way, which may in turn increase dry-docking time. Hence, improved maintenance and continuous control of the vessel’s condition may reduce the need for repair and also reduce the time spent in dock. DNV’s Hull Integrity Management concept is developed to help ship owners and managers to achieve this. It includes training for ship officers, crew and technical staff to help them better understand how to perform inspections and maintenance of their vessel. In addition, the Hull Inspection Manual provides them with systematics for what to look for, where to look, and how to report and follow up on deficiencies.
Time to act now …
So there you have it! We have an extremely fast growing fleet, combined with the upsizing of vessels; long queues where vessels have to wait sometimes up to six months for a repair slot; the lack of experienced seafarers often leads to a vessel’s being in poor condition, which increases dry-docking time. These and many more factors, such as conversions, when put together create the immediate impression that ship repair yards are going to be busier than ever before. It also indicates that building new repair facilities (or possibly converting newbuilding yards into repair ones) should take place as soon as possible in order to be able to cope with the massive future demand.
Deliveries have already in 2007 exceeded 80 million dwt, which is three times as much as the average delivery volume over the past ten years. All those vessels will soon need their first intermediate surveys. Bearing in mind that there will most likely be deliveries of more than 100 million wt per annum from 2008 to 2010, all the indications are that the world’s ship repair capacity needs to be substantially beefed up. It will definitely be an exciting business for many years to come …