Rivertrace Engineering owner Mike Coomber considers the changes occurring across the Asian shipping landscape and explains why dealing with smaller yards often makes good business sense
At Rivertrace Engineering we manufacturer oil content monitors and have done so for the past 36 years, more recently moving into scrubber washwater monitors. Consequently, we have a great deal of experience working with Asian shipyards; we understand what they are looking for and how they approach their suppliers. Any fundamental reorganisation of these yards will clearly have a profound impact on the supply chain, meaning suppliers really need to understand and appreciate the complexities of dealing with other cultures.
The global shipbuilding busines is, or rather was, only just regaining its footing after the decade-long downturn in maritime trade which saw orders plummeting.
As the Asian shipping landscape restructures itself along more protectionist and nationalist lines, we will see ongoing mergers and acquisitions and the emergence of some truly massive and powerful conglomerates; these will undoubtedly pick up the lion’s share of vessel orders.
Japanese yards in particular will be under extreme pressure to consolidate into conglomerates. As suppliers bid to work with these yards, relationships will be key to success, and those relationships must be forged on an appreciation and a respect for local language and customs. A third-party local agent makes a lot of sense in this context. In our experience, the Japanese and Chinese place the most emphasis on such relationships, whereas the South Koreans expect the ‘partnership’ to be 100% in their favour.
But alongside cultural understanding, the hard reality of costs is clearly of importance, especially in South Korea where year-on-year we see prices pushed lower. In these circumstances it is imperative to be on a yard’s makers’ list; without this you are guaranteed nothing.
There is little doubt that when dealing with the large yards, the buyer/supplier relationship is far harder to establish and much more one-sided. In our experience, it is much easier to work with smaller shipyards.
All shipyards are trending lower orderbooks and this certainly looks likely to continue until 2025 and possibly beyond. The top three Asian markets – South Korea, China, and Japan – combined dominate the orderbook with about 796 vessels on order; but that still leaves over 2,100 vessels being built by small yards in Asia and the rest of the world. These small yards really should be your target audience going forward, especially if you are not already on the makers’ lists of the big conglomerates.
Another consequence of the emergence of these ‘mega’ yards will be the ongoing standardisation of designs, which massively reduces costs.
That directly leads into the supply chain – whoever wins will get more orders, but there will not be much left for anyone else. It also means less choice for owners, while prices will be driven down, not up.
What does this mean for the supply chain? The impact of these considerations will be felt even when demand for shipbuilding gathers momentum. It is critical to get on the lists as early as possible, but strong local partners, good agents on the ground, in the same time zone, speaking the same language and understanding the psyche are just as important.
Smaller yards are far more friendly to do business with and the margins are a bit better.
Twenty or 30 years ago, owners had all the say when fitting their vessels, but with the emergence of the one-stop-shop for ship designs that all changed. Today, the yard is king, with the exception of very specialist vessels, so it really is imperative that the supply chain understands that and approaches the situation with understanding and respect.