In the ‘What Asian shipyard reorganisation means for the maritime supply chain’ webinar, panellists brought insights into what new shipyard groupings mean for the supply chain
The webinar was the first in Riviera Maritime Media’s Maritime Leaders Webinar Week, part of an ongoing series of webinars.
BRL Shipping Consultants founder and chief executive Barry Luthwaite presented the background to the discussion. He noted that shipbuilding is now dominated by China and South Korea. Japan has not won a significant shipbuilding export order for over a year. In a poll of attendees to this webinar, over 76% agreed that Japanese shipbuilding was facing an existential crisis.
South Korea has just received an order for 130+ LNG carriers from Qatar. For China, shipbuilding is part of the state’s aim to drive ever more value from its economy. He reported on the conglomeration of the main elements of shipyard reorganisation including how the mega Chinese shipyards are part of a system that includes finance, cargo and construction. As the Chinese state-owned shipbuilding structure has grown in scale, pricing has moved downwards. “China has announced a post-Covid-19 price reduction of 20%. This will have a knock-on impact on suppliers.
For shipowners, this could mean VLCCs priced at US$82-84M. For suppliers, especially European suppliers, the difficulty will be in supplying products at matching prices. The low prices require streamlined low-cost suppliers. As a result, there is very little room for owners to exercise choice. “Owners today cannot really dictate what equipment they want. They have to go with the shipyard package.”
In a poll, 90% of webinar attendees agreed that cheaper priced ships mean equipment owners will be forced to adjust their pricing and negotiating stance.
Society of Maritime Industries (SMI) chief executive designate Tom Chant, explained SMI’s role is to support UK maritime industries and win business overseas. Looking at the situation in China, he noted the majority of shipyards are state-owned enterprises. “They naturally look to their own supply chains,” he said. The main elements in the policy are:
For UK companies offering similar products to those available elsewhere in the Asian market, the pricing policy of Asian yards makes for a difficult situation. “If you are not on the maker’s list, you are going home,” said Mr Chant.
Attendees agreed (65%) it will be tougher in the next 2-3 years for suppliers to obtain preferred equipment supplier status on certain ship designs at Asian yards.
Danish Export Association head of marine Mark Lerche had some advice for all marine suppliers. He noted that in Asia it is difficult for European suppliers to even commence a dialogue. “It is hard to get the right meetings in Asia,” he said. He suggested lobbying national trade bodies to open the dialogue with domestic trade bodies or to use a local representative. But there is a conflict. He noted that at a recent meeting, Chinese shipyards urged Danish OEM suppliers to cut out the agents and sell direct to bring down the cost base. But at the same time, they require the service levels agents provide such as speaking the local language, understanding the culture and working in the same time-zone.
Webinar attendees were polled on how they would deal with Asian shipyard reorganisation:
Water quality specialist Rivertrace Engineering owner Mike Coomber noted that if the proposed shipyard mergers in Japan and South Korea take place, the resulting groups would have 45% of the forward orderbook. He also noted some of the psychological markers that are important when negotiating with Asian yards, “Prices must be very competitive, especially in South Korea as year-on-year they will push (supplier) prices down, irrespective of whether they are pushing (ship) prices up,” said Mr Coomber.
You can view the webinar, in full, in our webinar library.
And you can sign up to attend one of our many upcoming webinars on our events page.
Panellists: (left to right): BRL Shipping Consultants founder and chief executive Barry Luthwaite, Danish Export Association head of marine Mark Lerche, Rivertrace Engineering owner Mike Coomber, Society of Maritime Industries chief executive designate Tom Chant