Output Value up 50%! Ship Repair Market Booming

Wang Jin

Compared with the bulbous bow refitting business in 2014， the retrofitting business of ship exhaust desulphurizing tower， which began in the first half of 2019，broke the original supply and demand pattern and brought more rare favorable market. According to the preliminary statistics of the 70th meeting of SPCC for Chinese ship repair enterprises， from January to September this year， the output value of ship repair increased by 50%on the basis of a 4% drop in the number of completed vessels compared with the same period last year， showing a strong momentum of development.A Shanghai company has completed the repair of two large LNG carriers， and the world's first 15000TEU container ship dual-fuel power conversion project began in August.

The desulphurizing tower retrofitting is the focus of the ship repair market，and China's ship repair industry has made outstanding contributions to global shipping emission reduction. As of September 30， SPCC member units had completed the retrofitting of more than 400 units (sets) this year， holding orders hit 1100 units (sets)， of which new orders of 129 units (sets) were received in the third quarter， and 8 enterprises had taken in more than 100 units (sets) of orders.

In the coming period， the ship repair market will continue to be popular.Participants analyzed that in accordance with the principle that the ship repair starts once ship certificate expires， the number of ships for special survey will increase sharply in 2020， thus benefiting the ship repair market. In addition， global desulphurizing tower manufacturers are still on the rise in hand-held orders，according to the latest statistics from

Strong Growth in Ship Repair Market

Statistics show that from January to September， the total output value of 19 SPCC member units was 14.6 billion yuan，an increase of 50% year-on-year， and the number of ships completed was 3155，down 4% YOY. The backbone enterprises have continuously optimized the product structure and made new progress. An enterprise in Zhoushan has completed the repair of nearly 20 400，000-ton ships.Clarkson Research， a British firm.Industry insiders believe that in the first quarter of 2020， the price of compliant low-sulfur oil is likely to rise， which will prompt a large number of previously hesitant small ship owners to pour into the desulphurizing tower retrofitting market.

Production Resources Increasingly Tight

At present， many ship repair enterprises are very tight in production resources. According to the relevant enterprises， a large number of desulphurizing tower projects occupy mechanical， electrical， berth and other production resources， which has become the main bottleneck of ship turnround.There is also a hybrid desulphurizing tower project with a construction period of up to two months. Industry analysts say the completion volume of desulphurizing towers in China's ship repair industry has reached 250 sets in a single quarter， and there is little room for further improvement， so we should pay attention to the deadline missing risk of desulphurizing tower project.

Meanwhile， with the increasing requirements of environmental protection， some ship repair resources and process equipment are restricted. In order to comply with the development trend of green ship repair，many ship repair enterprises are trying out or improving the new environmental protection process equipment. While the production tasks are up to their neck， the efficiency of some new environmental protection process equipment has decreased.

The shortage of production resources will inevitably lead to"one dock is hard to find." As of the beginning of October， due to the saturation of production tasks， dock period of a number of SPCC member units had been scheduled to the second quarter of 2020; some northern ship repair enterprises will basically be fully ordered in the first quarter of next year， and the market in the northern region will be in short supply in the off-season. For the desulphurizing tower project， a number of enterprises claimed to mainly digest orders in hand next year， reduce the number of newly received orders， and set aside the appropriate docking position and wharf resources to serve old customers.

Composite Costs Continue to Rise

Ship repair companies began to live a good life， but the upward pressure on costs is still strong. In the aspect of green ship repair， the alternative technology of sand blasting and rust removal of shell plate is gradually adopted by more and more ship repair enterprises， and the related hardware investment is increasing.The costs of treating paint barrels， oil sludge and other solid waste have been skyrocketing all the way. Due to its special geographical location， the cost of oil sludge treatment has reached 11000 yuan/ton. An industry source predicted paint barrel， oil sludge treatment costs will continue to rise in 2020.

This wave of rising labor costs is also evident. Participants said that outsourced workers have mastered more initiative in wage bargaining， especially plumbers and copper workers are in short supply， and labor costs are rising.In the hybrid desulphurizing tower project featuring large work amount， long construction period and low contract price， the high labor cost will directly cause the order deficit.

"Seizing the opportunity and striving to improve the profitability is the top priority of ship repair enterprises."Industry sources suggest making risk prevention in the follow-up order， and strengthening the binding force of the contract terms and increasing the proportion of advance payments， if necessary. The all-staff co-created and shared management being carried out by the relevant private ship repair enterprises can effectively stimulate the executive force and cohesion of employees， improve cost control and quality service. The practice is worthy of reference by other enterprises.

The industry association called for being vigilant against blind lowprice bidding regardless of the interests of the industry and further strengthening industry self-discipline. For ship repair steel scrap， paint barrels， oil sludge and other solid waste， the industry association will step up their work to promote reduction， recycling and bio-safety disposal along with the government and scientific research units.

Take Precautions against a Rainy Day

Since the beginning of this year， the strong demand for desulphurizing towers has reversed the original relationship between supply and demand in the ship repair market， greatly improved the boom of the ship repair market， and the production and operation situation of ship repair enterprises has also been significantly improved. However， whether there are some variables in the retrofitting of desulphurizing tower in the later stage， whether the ship repair price will fluctuate sharply before and after the market peak， and whether new business growth point can be found in the "postdesulphurizing tower era" of the industry are all the problems that the ship repair enterprises need to deal with in advance.Only through early planning and early action， can the ship repair industry go further on the overall stable and betterstructured track.

At present， many ship repair enterprises have sufficient handheld orders for desulphurizing tower retrofitting for 2020， and the market situation is optimistic at least for a while.After that， it is difficult to fully see the market trend of desulphurizing tower retrofitting business. Compliant low sulfur oil prices and emission control zone policies will have a significant impact on the business. On October 25， the Maritime Safety Administration of the Ministry of Transport issued the“2020 Implementation Plan for Global Marine Fuel Sulphur Limitations”.Therefore， it requires deep analysis in advance as to when the "postdesulphurizing tower era" will arrive as well as the development and change of desulphurizing tower and its retrofitting technology.

Another problem that must be faced is the repair price. Compared with the beginning of the year， the prices of various ship repair enterprises have risen to varying degrees， and this momentum is still continuing. When the desulphurizing tower retrofitting business is drawing to a close and fades to silence， the ship repair price will lose the strong support.However， the comprehensive cost of ship repair enterprises is difficult to fall back，especially the rise of labor costs， which directly affects the profitability of ship repair. Only by predicting and preparing for the situations， can we avoid major crisis and pressure.

Furthermore， in dealing with the post-desulphurization tower era， we should also adapt to the market and make early layout in order to cultivate new business growth points. Industry sources analyzed that the current number of dual-fuel ships is not large and its refitting market is full of opportunities and challenges. In the case of large container ships alone，there are at least 50 15000TEU carriers and above， and the trend of dual-fuel refitting will become increasingly clear.In this field， some ship repair enterprises have got a head start. Therefore， laying an early good foundation in the hardware，technology， management， marketing and other aspects will gain enough advantages and take a new road in the expansion of business structure.