UK: DSC Ltd Expects Interesting 2011 for Shiprepair Market

2011 will be an interesting time for the shiprepair market predicts Drewry Shipping Ltd. The boom times have past. The burning question now is, will the gloom times be avoided? Certainly, the market has shifted from the 2008 position, when yards could pick and choose, to one which is far more competitive. Early 2011 brought reports of some startlingly low quotes for steelwork replacement.

Is this a sign of desperation? Such moves look unsustainable. The difficult fact for the shipyards is that owners have not recovered from the trauma of late 2008’s freight market collapse. Since then, many have gone into minimum maintenance mode. They will only commit to doing what is absolutely necessary. This could be storing up problems for the future. It is also a concern if owners are prioritising cost over quality.

This makes it an unfortunate time for an influx of new capacity to come on to the market. China has completed much of its expansion – though a few more yards still appear to be in the pipeline. The immediate portents look to be a slowdown for at least the next 2-3 years. Consolidations cannot be wholly discounted. However, the big question lies with what happens when a number of China’s shipbuilders see their orderbooks finally dry up. They might add to repair capacity. However, the shiprepair industry – not surprisingly – believes that builders do not necessarily make good repairers. Meanwhile, two major new sites (in Qatar and Oman) have opened in the Middle East. Also seeing expansion is the repair sector in Turkey. Very little repair capacity has been lost. Markets are always vulnerable when the building of market share is a priority for some.

One positive for the repair market is that the global fleet continues to grow. This should continue even if not all of the recent newbuilding order glut sees the light of day. However, shiprepairers also need shipowners to thrive. Shiprepair is a service industry. The traditional view is that shiprepairers’ fortunes mirror those of their shipowner clients – but with a time lag. Rising freight rates, therefore, would be in everyone’s best interests.

[mappress]

Source: drewry, August 22, 2011