Engaging Worldwide Production Capacity for Broader Market Coverage
Leading in design and construction of highly complex vessels and equipment worldwide, IHC Merwede now prepares to become competitive in the market for vessels and constructions of lesser complexity. Developing and building at local plants around the world, the international company expects growth by servicing a broader market segment. As IHC Merwede’s president Govert Hamers puts it: “If you can win at the top, you can also win in the mid-range.”
“We helped Chinese emperors to make the Yangtse River navigable, 140 years ago.” Hamers emphasises the long tradition of international entrepeneurship within his company. Merwede Shipyard and Internationale Handels Combinatie Holland were both very specialised and acting worldwide even before the 1992 merger. “Not only building vessels and constructions for dredging and offshore, but also having the knowledge and skills of developing the best equipment needed aboard such vessels, we have operated on an international level for generations.”
After all these decades of successful international business, IHC Merwede still has a quite unique position: “We are the only multinational company that has the in-house capacities to design and build both vessels and the equipment needed aboard. This derives from a long-lasting company strategy: we do not only deliver the vessels, we provide life cycle support for them, helping our clients to operate them throughout their life span. Our goal is to provide vessels and equipment as tools for our clients to make more profit than with the products other manufacturers deliver. This approach has gained us a lot of knowledge, as we learnt about the practical needs of our customers in the dredging and offshore industries. Providing support and maintenance on a continuous basis, we now really understand the day-to-day problems operators on working vessels encounter. That has helped us to develop machinery and vessels that answer to the practical needs of operators. Ergonomics, efficiency in operation as well as efficiency in energy consumption have been guiding priciples that help our clients operate effectively. As a result, we have evolved to be highly specialised. It also presented us with the need to develop equipment in-house. No supplier of equipment had gained the day-to- day insight in operations with our vessels and equipmentaswedid.Thisspecialisationhas long been our strength. It put us in the forefront of technological development. We aim to keep on operating on that level.”
Hamers is well aware that the Netherlands is an ideal location for a company to perform in a constant process of innovation. Still, reality in the world market shows governments favouring local manufacturers and operators. Import taxes block deliveries from abroad. IHC Merwede, active in fifteen countries all over the world, engages local workforce and has local yards and factories to be able to serve markets abroad atcompetitive price levels. “We prefer to work with local professionals”, Hamers reveals. “The core of our advanced technological knowledge is in the Netherlands. From our yards and factories here, we deliver the most advanced equipment and craft, as well as prototypes for vessels that can later be produced at one of our yards or plants in China, Brazil, Singapore or the United States, just to name a few. We strive to have only a few expats working at the yards in other countries. Our philosophy is that a plant should be integrated into the local economy and society, with local people working there and local suppliers joining forces. A company investing in facilities in another country should always strive to become integrated into local society. This is probably not something that can be achieved in a few months, but that takes a long time. Investment abroad of course needs to be a long-term strategy, rather than a prospect for a quick profit.”
The shipbuilding industry is often seen as a driving force towards further industrialisation in developing countries. This type of industry generates a lot of jobs and demands resources. Thus, it also activates suppliers. To maintain this stimulating factor in a country’s development, governments try to protect the shipbuilding industry from foreign competition.
Local presence and commitment
“Local presence and commitment also help us to be active in these protected markets”, Hamers explains. “Of course the USA have the Jones Act, requiring vessels that sail from one USA harbour to another to be of American build and employ American crew. Clients from the USA that want to take advantage of our technology can do so because we have facilities in Louisiana. As we have a joint venture with a yard in Dalian in China, we can deliver to Chinese ship owners without having to pay 25 percent import tax. For a client that ordered two identical hopper dredgers, we have built one in the Netherlands, doing all the engineering here and developing the power plant and equipment. The second one is being built at our yard in China. As it is a complex vessel, it needs a lot of project management from the Netherlands to see it finished to specification. Therefore, I am glad to say that the construction process is proceeding to plan at the moment. Actually, this is quite unique for Chinese shipbuilding. Likewise, Brazil demands involvement of the local industry with the vessels operating along its shores. In recent years, the Brazilian shipbuilding industry is emerging. For a recent contract we signed with Malaysian oil and gas company SapuraCrest, we will design, build and construct two out of three vessels in the Netherlands.”
These vessels are the first fully integrated offshore vessels completely designed, engineered and built by IHC Merwede with a pipelay spread supplied by IHC Engineering Business. IHC Drives & Automation will deliver the integrated automation system, the full electrical installation and the complete electrical machinery package. Other IHC Merwede businesses, such as IHC Piping, are also delivering equipment. A third contract has been signed with OSX Construção Naval S.A. Brazil for the design and engineering of a 300 ton pipelaying vessel as well as a large equipment package supplied by IHC Engineering Business, among others.
Hamers: “Because of our market activities and local presence in all these countries around the globe, we have built up some impressive production capacities. The plant that builds high-technology equipment in Kinderdijk, the Netherlands, produces only a small part of all equipment installed aboard IHC Merwede vessels. The other part is constructed at our facilities in other countries. Producing elsewhere means reducing costs. In many of the countries we are active in, wages are lower than in the Netherlands. We are not exporting our company knowledge, but we need to involve production capacity in a clever way.”
“Having built up this extensive network of yards and production facilities, we need to reorganise to engage all our company branches to their utmost potential”, Hamers continues. “We should not try to rule the world from our Sliedrecht office. We activate regional hubs and enable them to operate strategically at their own markets. Recently, we announced the establishment of the IHC Hydrohammer American headquarters in Lafayette, Louisiana. We also have regional hubs in Singapore, China, India, the United Arab Emirates and Brazil.”
New Singapore office
On 12 April IHC Merwede officially opened their Singapore office, which will serve as regional headquarters for South East Asia. “A big part of our global stategy,” Hamers describes the settlement of the new headquarters. “We are pleased to increase our commitment to Asia. It is a major international maritime oil and gas hub and has the necessary infrastructure in place. As our Asian customers come to benefit from our customised and technological solutions, plans are already in place to expand the company in the region.”
He continues: “With Dutch maritime industry ahead in innovation, we maintain our position as supplier of advanced equipment and innovative vessels as well as life cycle support. Yet, proven technology is also in demand and not every vessel or piece of equipment needs to be innovatively engineered. We plan to operate in the mid-level market, engaging all the capacity we have around the world.”
While Europe is facing a monetary crisis, that is mostly self-inflicted by mass media distrust according to Hamers, the rest of the world is still celebrating economic growth. IHC Merwede remains vital, also due to its international scope. The fact that the European and Dutch financial climates are being restrictive imposes new threats to closing international contracts. Providing financial tools for clients who want to order vessels with equipment is harder while banks and other financial institutions are reluctant to invest. IHC Merwede has come up with innovative financing for the SapuraCrest order of two pipelaying vessels for the largest working capital guarantee ever issued by Atradius Dutch State Business – on behalf of the Dutch government. IHC Merwede has signed a working capital finance facility of € 200 million with its bank consortium, formed by ABN AMRO, BNP Paribas, Deutsche Bank, ING and Rabobank. The banks are providing the capital because Atradius Dutch State Business covers the repayment risk through a working capital guarantee. This facility will be used by IHC Merwede to cover the construction costs. The guarantee has been developed after close cooperation with the Dutch Ministries of Finance and Economic Affairs, Agriculture and Innovation, banks and exporting business. The overall aim is to promote the provision of working capital to Dutch capital goods exporters, so that they can have access to the required financial resources.
With this finance agreement in place, IHC Merwede will start the work on the construction the vessels for its Malaysian customer SapuraCrest. The ships are part of a recent offshore order worth € 450 million. They will install flexible pipelines in Brazilian waters, where large quantities of oil have been discovered. The delivery dates for the vessels, which will be built in The Netherlands, have been set for May and August 2014 respectively.