“Initially, when China was isolated, both Singapore and the Arabian Gulf faced a massive demand for drydock slots, which was much greater than they were able to accommodate. A few weeks later, European and Turkish shipyards ceased operation, and China has slowly resumed its activities. Nowadays, while China has almost fully recovered from a shortage of manpower, Singapore and the Arabian Gulf are under-performing.” However, given the massive postponements on repairs so far this year, Vassiliou predicts a wave of ship repair work that will fill most yards later this year.
Jad Mouawad, CEO of Mouawad Consulting, which has undertaken over 200 ballast water treatment system retrofits in China, also notes the trend to postpone dockings in February 2020 due to COVID-19 restrictions in China. “However, some shipowners with a strong presence in China took that opportunity and docked even more ships. This docking was almost always accompanied by a retrofit of a ballast water management system and a scrubber.”
There is some activity using riding crews, but Mouawad estimates that over 90 percent of the retrofits are done during drydocking. “There is, as expected, a tangible increase in the quality of the work done by the shipyards. This is mainly due to the good presence of experienced supervisors.”
Sandeep Seth, President Goltens Worldwide, says yards in China are operating at around 70-80 percent capacity, and scrubber retrofits have reduced compared to last year. However, he notes that last year there were some capacity issues. “While demand for scrubber retrofits have tailed off given the economic climate under which the merchant and offshore segment is operating, resulting in tight cash flow for the owners and imminent need to reduce capex, it has resulted in under-utilised capacity at least in the short to mid term. The other factor contributing to reduced demand is the use of compliant fuel.”
While ballast water treatment system retrofits will continue, the scrubber retrofit demand is not expected to increase exponentially in the short- to mid-term, he says. “Hence we do not foresee significant capacity issues with Chinese yards. China will continue to be the go-to place, as they are competitive, have the infrastructure and continue to share a large portion of the global docking.”
China’s dominance in the market is being felt in Russia where yards are suffering due to financial restraints, reports analyst PortNews IAA. Yards that specialise in inland vessels can afford to expand, but yards focused on the repair of sea-going vessels are largely working on state-owned vessels that are required to be repaired in Russia. In other cases, shipowners are looking to cheaper, faster foreign yards.
Ship repair and retrofit orders are commonly placed with South Korea or Chinese (for ships operating in the Far Eastern Basin), Norway (Northern Basin) and Turkish (Southern Basin) shipyards, says Nikolay Shablikov, Chairman of the Board, Nordic Engineering JSC, a Russian engineering and consulting bureau. “Over the past 30 years the enterprises in these countries have earned the trust of Russian customers due to shorter contract execution time at a competitive price.”
Shablikov says that the purchase of imported marine components constitute up to 70 percent of repair costs, and, in addition to VAT, they are also subject to customs duty, because many manufacturers of imported marine equipment required for outfitting ships were forced to leave the Russian market due to sanctions.
He says competitiveness could be improved by the adoption of a draft law to reduce VAT to zero for Russian shipyards along with targeted support to help yards modernise their production capacities.
Back in Asia, Malaysia Marine and Heavy Engineering Holdings Berhad noted that its Marine segment registered lower revenue in the first have of the year than the previous period due to the pandemic. The global slump LNG demand also had an impact as did competition from China and Singapore. Commenting on the first half results, Managing Director and Chief Executive Officer Cik Wan Mashitah Wan Abdullah Sani said, “Whilst we have resumed our yard operations from April 2020, our activities are still constrained to the ‘new normal’ with restrictions imposed to ensure that the COVID-19 pandemic is kept under control. We are also vigilant on the happenings around the world, mainly in the countries where we source our supply given the recent resurgence of COVID-19 cases globally, which could have an impact on the progress of our ongoing and bidded projects.” He expects business to remain uncertain for the rest of the year.
Norway-based Newport Shipping is positive about the potential for its turnkey services for LNG conversions which take around 45-60 days. Managing Director Lianghui Xia is confident that conversions using existing technology offer the shipping industry an achievable mid-term solution for cutting emissions to meet IMO targets. “Retrofitting all the vessels currently at sea with greener technology is paramount if we want to attain the scale of emission-cutting that is required.”
He says that immediate action is needed and that COVID-19 has shown that the world can change rapidly. “If we don’t stay alert and be ready for adaptation we will suffer collectively. The supply disruption brought by a global lockdown has already caused huge suffering to many people both emotionally and economically. So to apply the same logic to the front of environmental protection, we cannot afford the price we have to pay down the road caused by lack of action today.”