Current Situation in the Shipbuilding Industry and Long Term World Shipbuilding Forecast (SAJ2015) Hiroshi Iwamoto OECD Council Working Party on Shipbuilding (WP6) Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 1. Current Situation in the Shipbuilding Industry Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 2 1
1-1. History of Shipbuilding Industry 120 100 Completions from 1965-2014 (million gt) Bankruptcy of Lehman Brothers (2008) 80 suffering situation again 60 40 20 Oil Crisis (1973&1979) suffering situation Value Creation is needed 0 65 70 75 80 85 90 95 00 05 10 14 Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 3 1-2. Challenges for Value Creation Scenario (1) 1. Human Resources As already pointed out, the current shipbuilding activities have weakened the development of engineering to increase values of our products from various aspects. While the workforce at the shipbuilding site can be outsources to a certain extent, the engineering power needs to grow from inner potentials. When the value creation scenario comes into the highlight, further wider range of engineering capability becomes necessary. Inner potentials can only be enhanced through a closer understanding of the company objectives and the management need to be more transparent towards the younger generations. Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 4 2
1-2. Challenges for Value Creation Scenario (2) 2. Adaptability to New Marine Technology As a result of more value creation thinking there seems to be, although still limited, the ambitious attempts to apply new technology. This has particularly been so in Japan on the LNG burning engine related technologies, propulsion systems and energy saving devices, emission controls, IT related systems. Combining various technologies for environmental advantage as well as energy saving is becoming a popular idea, which involves, hardware and software. While success stories are needed to create a more powerful move in the industry, we also need to remember that against one successful results, there could well be a few if not many efforts wasted and more thoughts may be needed to improve efficiency. Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 5 1-2. Challenges for Value Creation Scenario (3) 3. Regulatory Development This is a great concern where more stringent regulations for safety and environmental protection are introduced every now and then. Adaptability to those regulations will be a key issue for all shipyards and it will very much depend on how the regulations are implementation friendly. Some regulations have been set in a rush to achieve results, and there might be political importance in doing so, but if new technology is involved in the rule making process, this needs to be done carefully in order to prevent any undesired or unintended consequences arising from lack of careful impact analysis. Once the rules are in force, it will not be easy to take corrective actions. Shipbuilders will have a large role to play in providing impact analysis. Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 6 3
2. Long Term World Shipbuilding Forecast (SAJ2015) Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 7 2-1. Introduction of SAJ Forecast SAJ Forecast has periodically been done since 1960 s, to support long-term business strategy making of SAJ s member companies. is based on both forecasts of future seaborne trade development and future replacement. So, speculation orders, and short-term volatility of shipping freight and shipbuilding price are NOT taken into account. Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 8 4
2-2. Rough Sketch of SAJ Forecast Methodology Newbuilding Requirement by Ship Type Derived from Seaborne Trade Newbuilding Requirement by Ship Type Derived from Replacement Based on various factors such as GDP Growth Energy Consumption Population Increase Crude Steel Production/Consumption SAJ s Demolition Model Ship Type (example) Oil Tankers (200k+) Bulk Carriers (100k+) Containerships Age 25 24 28 50% of vessels assumed to be scrapped at above age Newbuilding Requirement Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 9 2-3. Assumption of GDP Growth in SAJ2015 GDP Growth Forecast (%) 2013-35 2013-20 2020-25 2025-30 2030-35 OECD 2.0 2.2 2.0 1.9 1.9 Non-OECD 5.0 5.4 5.3 4.8 4.2 World 3.7 3.9 3.8 3.6 3.3 Based on economic outlooks of various organisations such as IMF, IEA and EIA Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 10 5
2-4. Seaborne Trade Forecast in SAJ2015 18,000 16,000 14,000 12,000 (mil. ton) (million ton) Growth Rate between 2014-2035 2035 Share Total Cargo 2.2%pa 16,296 100% LPG/LNG 3.0%pa 697 4% Container Cargo 3.6%pa 5,853 36% Minor Bulk 2.4%pa 1,954 12% Major Bulk 1.2%pa 4,013 25% Oil 1.3%pa 3,780 23% Forecast 11,617 13,084 14,671 16,296 10,000 9,963 8,000 6,000 4,000 2,000 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Crude & Product 5 Major Bulk Minor bulk Other Dry Gas (LNG, LPG etc.) SAJ2014 Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 11 2-5. Replacement demand in SAJ2015 Assumption of Average Scrap Age by Ship Type in SAJ2015 30-40* (age) 50% of vessels assumed to be scrapped at above ages and create replacement demand. *depends on Shipsize or Shiptype Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 12 6
2-6. SAJ2015 Newbuilding Requirement Forecast (1) Mill. GT 120 100 80 Av.Newbuilding Requirement 2014-2035 Share Total Newbuidings 63.4 Mill.GT 100% Others(Offshore etc) 6.9 Mill.GT 11% Gas Carrier 3.9 Mill.GT 6% ODC Ship 5.2 Mill.GT 8% Container Ship 17.1 Mill.GT 27% Bulk Carrier 18.2 Mill.GT 29% Tanker 12.1 Mill.GT 19% 69.9 96.2 60 40 41.8 52.4 20 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 80 60 Av.Newbuilding Requirement 2014-2035 Share Total Newbuidings 40.2 Mill.CGT 100% Others(Offshore etc) 10.8 Mill.CGT 27% Gas Carrier 3.1 Mill.CGT 8% ODC Ship 4.2 Mill.CGT 10% Container Ship 9.0 Mill.CGT 22% Bulk Carrier 8.4 Mill.CGT 21% Tanker 4.9 Mill.CGT 12% 43.5 57.4 Mill. CGT 40 29.3 34.0 20 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Tankers Bulk Carriers Containerships Other Dry Cargo Ships Gas Carriers (LNGCs & LPGCs) Others SAJ2015 SAJ2014 Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 13 2-6. SAJ2015 Newbuilding Requirement Forecast (2) Mill. GT 2014-20 2020-25 2025-30 2030-35 2014-35 Requirement from Replacement Requirement from Seaborne Trade Total Newbuilding Requirement 19.8 (47%) 22.0 (53%) 21.8 (42%) 30.5 (58%) 33.3 (48%) 36.5 (52%) 57.3 (60%) 38.9 (40%) 32.1 (51%) 31.3 (49%) 41.8 52.4 69.9 96.2 63.4 Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 14 7
Thank you for your attention Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 15 8