The global shipyard industry has been trying to consolidate its ranks since the 2008 crisis. Even the largest shipyards in China and South Korea are struggling to maintain production levels from years before. The consolidation process isn’t over and according to industry insights, a large number of inefficient yards are closing down and capacity is gradually adjusting to lower future demand.
Danish Ship Finance’s “Shipping Market Review” stated the low levels of freight rates and asset values clearly emphasise the current market is oversupplied – only 83 percent of the world fleet was in demand in 2014. Nevertheless, the consolidation process is expected to be finished next year, when the global yard capacity is predicted to return to the 2008 levels as newbuilding prices started to move up in the second half of 2013.
But shipyards can only fully realise these higher margin orders in 2016. The GCC region, despite the global shipbuilding slowdown, is developing as a dynamic maritime hub of newbuilding, dry and wet repair, offshore, and shipping. Regional shipbuilders haven’t completely dodged the global financial crisis, but the ripple effects were less intense compared to the global industry. The development is led by the UAE, Saudi Arabia, Oman and Qatar, where the region’s major ports and shipyards are located and more are under construction.
The majority of the GCC’s shipbuilding business is, in order to satisfy the demand caused by huge investments in offshore projects, largely focused on producing and repairing workboats (tugs, ferries, supply vessels; police, fire, patrol, pilot, rescue and oil spill boats; dredgers, barges and floating cranes), and less on building huge merchant vessels.
It is estimated that the Middle East forms around 20 percent of the global workboats market, with most of the vessels operating in the oil and gas sector. Since the GCC region is the single largest market for LNG (Liquefied Natural Gas) carriers and VLCCs (Very Large Crude oil Carriers), with more than 70 percent of the VLCC fleet trading out of this region, it is no wonder that each member state is investing in new shipbuilding facilities, so they can service their fleets.
A very good example of this is Qatar Gas Transport Company (Nakilat) whose LNG shipping fleet is the largest in the world, comprising 58 LNG vessels. Qatar’s flagship shipyard – Erhama bin Jaber al Jalahma Shipyard facility – is owned by Nakilat, which has established joint ventures with Keppel Offshore & Marine (N-KOM) to operate ship repair facilities, and with Dutch shipbuilder Damen (NDSQ) to carry out the construction of LNG tankers, supply vessels, tugs and large ships.
NDSQ has in just five years built more than 20 vessels – naval and commercial craft like tugs, offshore support vessels and corvettes, alongside superyachts. The shipyard is equipped with the latest technologies, machines and tools available in the shipbuilding industry, and ships are built using steel, aluminium or modern fibre-reinforced plastic (FRP). It has two travel lifts capable of lifting 1,100 tonnes and 300 tonnes respectively – the former being the largest such hoist in any boatyard worldwide. One of the most recent orders was to construct 11 workboats for use at the port from Qatar’s New Port Project.
The other yard facility, N-KOM, established in 2007, is undertaking the entire spectrum of ship repair services such as maintenance of main engines and overhauling of LNG cryogenic valves. Repairs are focused on gas carriers, tankers, bulk carriers, containers, dredgers, navy and offshore support vessels.
Erhama bin Jaber al Jalahma Shipyard, situated on the Southern Breakwater in the port of Ras Laffan, is divided into six phases: I, II and IIA deal with the repair of medium to large sized ships (20,000 to 400,000 deadweight tonnes) and conversions; phase III deals with fabrication and maintenance of offshore structures; phase IV and IVA involve the construction and refit of high-value small ships, including yachts; phase V is about the repair of small ships; and phase VI involves the construction and maintenance of fibreglass reinforced plastic vessels.
Like Qatar, the Sultanate of Oman is also heavily investing in its shipbuilding and ship repair industry. Oman Drydocks Company (ODC) was opened for business in 2011 in the new ports and logistics city of Duqm and it is a USD 1.5 billion shipyard run in partnership with Korean giant Daewoo Shipbuilding and Marine Engineering (DSME). The shipyard site extends over more than 1.3 million square metres, and since opening, it has handled a mix of ship types from VLCCs to container ships, LNG and LPG (Liquid Petroleum Gas) carriers to chemical carriers, dredgers, RO-ROs (Roll-on/Roll-off) and barges.
“Our yard is presently dedicated to ship repair and conversion but we have a future plan of building at the time when there is market demand for newbuilding. Whenever the newbuilding starts, it will start with small support ships,” ODC’s marketing department said in a statement to BQ magazine. Oman Drydocks is one of the biggest and best equipped shipyards in the world – its drydocks can accommodate any size of vessels and it has one of the longest docks in the Middle East at 2.8 km.
Also, ODC has painting services and facilities to deal with sludge and slops disposal; the slops and sludge terminal has a capacity of 10,000 cubic meters – the largest in the Middle East. Located outside the Strait of Hormuz, in deeper sea and along the main trading lines, the shipyard has been set up in three stages: the first stage is ship repair, the second is offshore and industrial work, and the final stage is shipbuilding. “The GCC region is a new hub for repair business located on strategical trading routes,” says ODC, adding that when it comes to new ship building in the GCC, there is less demand than supply.
With the maritime industry valued at USD 61 billion, the UAE’s naval shipbuilding, repair, overhaul and maintenance of warships is the biggest in the Gulf region. Two shipyards – Abu Dhabi Ship Building (ADSB) and Etihad Ship Building (ESB) – have managed to establish themselves as leading regional players when it comes to military shipbuilding. The biggest and the busiest commercial shipyard in the UAE is Dubai Drydocks World (DDW) which has, after its establishment in 1983, broadened its operations from repairs to construction, conversion and offshore platform building.
Overcoming bankruptcy, DDW’s order book today looks completely different from a few years ago. During 2014 the company received 306 orders among which was a USD 730 million contract for the largest rig ever to be built for the North Sea, as well as construction of the world’s first LNG harbour tug, which will help DDW to position itself in a growing green shipbuilding market.
Dubai’s maritime sector is a major income generator accounting for USD 3.9 billion or 4.6 percent of the local GDP. Moreover Dubai World Group has established a Dubai Maritime City, the world’s first purpose-built city for the global maritime industry. Spanning 227 hectares, it boasts industrial, operational, commercial, academic, residential and life-style activities and is to be home to global maritime companies.
Saudi Arabia is also planning major investments in the shipbuilding industry – in 2013 Saudi Arabian Oil Co. (Saudi Aramco) and STX Heavy Industries Co. of South Korea announced a plan to build a USD 4 billion ship repair and fabrication yard in Ras Al-Khair.
One of the biggest shipyards in the Kingdom is Dammam Shipyard – the 23-hectare site in King Abdul Aziz Port of Dammam equipped with two floating dry docks – one 215 metres long with a 22,000 tonne lifting capacity, and the second, 165 metres in length with a 10,000 tonne lifting capacity. Both docks are 35 metres wide. The yard is focused on five core services – full maintenance, specialised blasting and painting, on site machining and specialised labour services like tank cleaning.
On the western Red Sea side, there is urgent need for a large repair facility – the narrow waters between the Arabian Peninsula and Africa are the busiest trade routes in the world, with more than 25,000 merchant vessels navigating north and south, but just two repair yards with limited docking capabilities are available in Jeddah and Suez.
Demand for leisure boats
Development of marinas around the Gulf has spurred vessel ownership on a personal basis and for business. For more than a decade, the marine and yachting industry in the GCC has been one of the fastest-growing in the world:
It is estimated that by 2020 the number of berths in Dubai will reach 20,000 and in Abu Dhabi 7,500.
The UAE currently has 30 marinas and 4,816 berths, while there are 64 marinas and 12,629 berths across the GCC, with the UAE accounting for 38 percent of the entire GCC marina berthing market.
Boat building is a key driver of growth in the maritime industry: the UAE invested between USD 170 million and USD 220 million on boat design and boat building in 2013. On average, each boat contributes approximately USD 15,000 to the GDP through fuel, repairs and other services.
Shipyards in the Gulf are busy building mega yachts – according to US-based ShowBoats International Global Order Book 2015, UAE luxury yacht builders plan to build 15 superyachts.
When it comes to demand for giant leisure boats (superyachts are generally defined as being at least 30 metres long), there are virtually no limits in the region with some of the world’s highest concentration of millionaires. The UAE has recently introduced a new Yacht Code, which is free of restrictions in terms of number of passengers on board and allows yachts to be made of any construction material like steel, aluminium, composites or wood.
Manufactures were also given greater flexibility in the formation of the yacht’s hull using a single or a multi-structure hull, and the regulations do not govern a maximum length of the yacht with using sails and engines of different kinds. This new regulation will ensure UAE’s position as one of the world’s leading international yacht manufacturing hubs.