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The Shipbuilding Industry

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The Shipbuilding Industry
Published Date: Mar, 2013
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  • Abstract
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The Shipbuilding Industry - Riding the Economic Wave

The global economy recovering from the aftermaths of economic crisis grew at 5.1% on y-o-y basis during CY10 leading to a marginal increase in seaborne trading volumes. This provided an impetus to the new-build ordering volumes during CY10 aggregating 71.1 mn GT. Conversely, the orderbook continued to decline aggregating 287.8 mn GT as on December 31, 2010 owing to the continuous flow of deliveries by the shipyards. However with the global economy slowing down in the latter half of H1CY11 on account of fiscal imbalances in the developed nations, the seaborne trading volumes deteriorated, adding to the woes of the already over-existent vessel capacity. Nonetheless, the momentum in the new-build ordering continued through H1CY11 aggregating 31 mn GT increasing by 19.2% on y-o-y basis. The orderbook however declined to 269.9 mn GT as on June 30, 2011 on account of higher deliveries aggregating 47.7 mn GT during H1CY11.

Even the surge in scrapping volumes particularly in the dry bulk vessel segment and y-o-y decline in vessel prices in the range of 2-9% during H1CY11 provided no respite to the dwindling global shipbuilding orderbook, especially in case of major shipbuilding nations such as S. Korea, China and Japan thereby requiring their respective governments to take corrective monetary and non-monetary incentives to boost the industry’s prospects.

However, the Asian shipbuilders continue to dominate the global orderbook accounting for 95.4% of the total orderbook as on June 30, 2011. Of the same, in continuation of the trend during CY10, the market share of the Chinese shipbuilders in the global orderbook remained the highest at 39.7% followed by S. Korean and Japanese shipbuilders with 35.3% & 14.4% respectively.

The Indian shipbuilders occupied 6th rank globally accounting for 1.3% of the global orderbook aggregating 3.82 mn CGT with 187 vessels on order as on June 30, 2011. In view of the ageing fleet of offshore vessels globally with approximately 40% of the offshore vessels above 20 years of age, the specialisation of Indian shipbuilders in the construction of offshore vessels augurs well for the Indian yards. Also, the Indian navy’s announcement with regards to placing new-build orders with both the country’s public as well as private shipyards under the policy - ‘Buy and Make Indian’ has been a welcome move for the Indian shipyards.

CARE Research expects the over-capacity of vessels globally at 13-16% of the existing fleet during H2CY11 - CY13. Notably, with the global shipyards still accepting orders scheduled for delivery during CY14, the estimated excess capacity stands relatively lower at 8.42% during CY14. CARE Research expects minimal chances of order cancellations. However, in continuation of the trend during the economic recession, the global yards are expected to be faced with re-scheduling of vessel deliveries in the event of continuation of fragile global economic conditions together with the liquidity crunch from the shipowners point of view.




Section-I CARE Research’s OUTLOOK
The Global Shipbuilding Industry’s Prospects
Fleet overcapacity-leading to demand crisis
New orders - slowdown expected to continue
Delivery schedule – the spill-over effect
Deliveries – slowdown in offing
Scrapping – focus on reducing the excess
Order cancellations – the damage controlling act
Government incentives to propel industry’s growth
S. Korean and Chinese shipyards – global dominance to continue

Outlook -Based On Vessel Segment
Outlook on the Wet Bulk segment
Outlook on the Dry Bulk segment
Outlook on the Containership segment

The Indian Shipbuilding Industry’s Prospects
The Indian Shipbuilding industry – Facilitator of National growth
Indian shipyards: Dwindling orderbook position- a cause of concern
Indian Navy / Coast Guard orders - a ray of hope
Shrinking profitability margins- no respite in the immediate term
Lesser risk of order cancellations – some consolation still remains
GoI’s policy actions – key takeaways to watch out for….
The Indian Shipbuilding industry – Facilitator of National growth
Challenges & Concerns
Shipbuilding subsidy scheme
Infrastructure status to the industry
Preference by the Indian shipowners

Section II MARKET TRENDS CY11 & CY12
Vessel-wise Trends

Wet Bulk carriers
Orderbook and New orders
Investment and Deliveries
Scrapping and Vessel Prices

Dry Bulk carriers
Orderbook and New orders
Investment and Deliveries
Scrapping and Vessel Prices

Containerships
Orderbook and New orders
Investment and Deliveries
Scrapping and Vessel Prices

LPG, LNG and Chemical & Specialised carriers
Orderbook and New orders
Investment and Deliveries
Scrapping and Vessel Prices

Offshore vessels
Orderbook and New orders
Investment and Deliveries

The Global Shipbuilding Expanse

South Korea
Orderbook Size and Growth
Orderbook Composition
New orders and Deliveries
Major Players at a glance

China
Orderbook Size and Growth
Orderbook Composition
New orders and Deliveries
Major Players at a glance

Japan
Orderbook Size and Growth
Orderbook Composition
New orders and Deliveries
Major Players at a glance

Europe
Orderbook Size and Growth
Orderbook Composition
New orders and Deliveries
Major Players at a glance

India
Orderbook and Delivery Schedule
Orderbook Composition
Major Players at a glance
Overall comparison of the global shipbuilders in terms of orderbook size and value of orderbook (depicted through a graph)

Cost Analysis – Indian Shipbuilders
Raw Material expenses
Labour expenses
Financial expenses
Profit margins

Analytical Models
Porter’s Five Force Model
SWOT Analysis

Section III INDUSTRY BASICS
Industry Evolution
Industry Characteristics
Global Presence
Industry Structure
Cyclic Industry
Sell First, Construct Later
Standardized Pricing
Huge Investment Outlay
Working Capital Intensive
Labour Intensive
Constant Technological Enhancements
Long Gestation Period
Subsidized Industry
Regulatory Structure

Demand Drivers
Incremental Demand Drivers
Growth in sea-borne trade
Increasing Exploration and Production activities
Freight rates
Government thrust
Initiatives by the Government of India
Specialization in ship making

Replacement Demand Drivers
Age profile of fleet
Scrapping of tonnage
Regulation- phasing out of single-hull tankers

The Making of Shipyards
Shipyards Construction - Area of Focus
Development of Shipyards – A step-by-step approach
Flow chart for Shipyard Construction – From conception to
implementation
Shipyard Construction – Cost Breakdown

Shipbuilding – Production to Pricing
The Shipbuilding Process
Classification of Ships
Elements of Price Determination
Availability of Capacity
Shipyard's Cost production
National Policy
Currency Fluctuation
Competitive Forces

Section IV THE SHIP REPAIR INDUSTRY
Introduction to Ship Repair Industry

Global Ship Repair Industry

Indian Ship Repair Industry
Introduction
Performance of Indian Ship repair yards
Potential of Indian Ship repair business
Ship Repair during the Xth plan
Ship Repair during the XIth plan

Ship Repair – Costs & other Considerations

Section V REVIEW OF INDIAN SHIPBUILDERS
ABG Shipyard
Bharati Shipyard
Pipavav Shipyard
Cochin Shipyard
Hindustan Shipyard

List of Tables
Outlook
Estimation of excess fleet size
Re-scheduling of vessel deliveries
Vessel-wise Trends
Rigs –Fleet size & utilisation rate

The Global Shipbuilding Expanse
Global orderbook position
Orderbook & Capacities of Top 3 S. Korean Shipbuilders
Organisational classification of major Chinese shipyards
Orderbook & Capacities of Top 3 Chinese Shipbuilders
Orderbook & Capacities of Top 3 Japanese shipbuilders
Order Books & Capacities of Top 3 European shipbuilders
Orderbook of Indian Shipbuilders
Order Books & Capacities of Top 3 Indian shipbuilders
Orders placed by Indian shipowners with the Indian shipbuilders

Cost Analysis – Indian Shipbuilders
Raw material expenses as a % of total expenditure
Labour expense as a % of total expenditure
Interest expense as a % of total expenditure
Profit margins of 5 shipyards

Industry Characteristics
Comparative study of the Top 10 global shipbuilders
Net Working Capital requirements
Employee Cost as a % of Total Cost – Indian Shipbuilders
Shipbuilding Technology – From Past to Present
Long gestation period
Share of Subsidies in Net Sales & PBT
Regulatory Structure
Age Profile of World Fleet (as on January 1, 2012)
Age Profile of Indian Fleet (as on December 31, 2011)

The Making of Shipyards
Top 10 Shipyards of the World – Based on Order Book in CGT
Movement of the Exchange Rates (US$ – base currency)

Indian Ship Repair Industry
Ship Repair –Revenue potential in India
Xplan – Targets and Achievements
Ship repairs turnover in the Xth Plan period

List of Charts

Outlook
Expected Delivery schedule by Vessel segments – mn GT in %

Vessel-wise Trends
Wet Bulk - Orderbook & New orders
Wet Bulk - Investments & Deliveries
Wet Bulk - Scrapping & Vessel prices
Dry Bulk - Orderbook & New orders
Dry Bulk - Investments & Deliveries
Dry bulk - Scrapping & Vessel prices
Containerships - Orderbook & New orders
Containerships -Investments & Deliveries
Containerships - Scrapping & Vessel prices
LPG, LNG, chemical & Specialised Carriers - Orderbook & New orders
LPG, LNG, Chemical & Specialised Carries - Investments & Deliveries
LPG, LNG, Chemical & Specialised Carriers - Scrapping & Vessel prices
Offshore Vessels - Orderbook & New orders
Offshore Vessels - Investments & Deliveries
Offshore Vessels Scrapping & Vessel prices

The Global Shipbuilding Expanse
S. Korea - Orderbook size & growth
S. Korea - Orderbook composition
S. Korea - New Orders & Deliveries
Orders placed by the S. Korean shipowners
China - Orderbook size & growth
China - Orderbook composition
China - New Orders & Deliveries
Orders placed by the Chinese shipowners
Japan - Orderbook size & growth
Japan - Orderbook composition
Japan - New Orders & Deliveries
Orders placed by the Japanese shipowners
Europe - Orderbook size & growth
Europe - Orderbook composition
Europe - New Orders & Deliveries
Orders placed by the European shipowners
India Orderbook composition
Orders placed by the Indian shipowners

Cost Analysis –Indian Shipbuilders
Indian Shipbuilders - Comparative Cost Analysis FY12

Analytical Models
Porter’s Five Force Model
SWOT Analysis

Industry Characteristics
Evolution of global Shipbuilding Industry
Global Orderbook - mn GT in %
Asian Orderbook - mn GT in %
Break-down of world fleet orderbook by ownership - US$ bn in %
Break-down of Asian fleet orderbook by ownership - US$ bn in %
Orderbook & Investments – y-o-y % change
Comparative study of Labour Cost as a % of Total Production Cost
Sea-borne trade of various commodities
Global Oil – Demand & Supply
Spot Crude prices
Movement of Baltic Dry Index
World Tonnage Scrapped

The Making of Shipyards
Shipyard Construction – Areas of Focus
Development of shipyards – A step-by-step approach
Flow chart for Shipyard construction – From conception to implementation
Shipyard construction – Cost breakdown

Shipbuilding – Production to Pricing
Modular representation of the shipbuilding process
Types of Ships
Elements of Price Determination
Indexation of Exchange Rates w.r.t. US$ - (base year 2006)

Indian Ship Repair Industry
Growth of the World Fleet
Top Indian SRUs – Capacity-wise
Number of Ships Repaired in the country
Total revenue of ship repair industry

Annexures
Annexure 1 The Indian Shipbuilding subsidy saga
Annexure 2 List of Public & Private sector shipyards
Annexure 3 Profiles of various Ship Types
Annexure 4 Dockyard facilities of Top 3 S. Korean shipbuilders
Annexure 5 Dockyard facilities of Top 3 Japanese shipbuilders




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