The Shipbuilding and Offshore Marine Supplies Industry

24/11/2014

Including selected results of a study for the European Commission 2013/2014

Joachim Brodda BALance Technology Consulting, Bremen, Germany

WORKING PARTY ON SHIPBUILDING (WP6) WORKSHOP ON SHIPBUILDING AND THE OFFSHORE INDUSTRY

Various Markets for Marine Supplies

• Newbuilding of Merchant Ships and Offshore Ships (shipyards, boatyards and shipping companies) • Ship repair and conversion of merchant ships (shipyards, boatyards and shipping companies) • Retrofitting - a special conversion market for ships following new regulations (shipyards, boatyards and shipping companies) • Naval shipbuilding incl. maintenance and repair (shipyards and governments) • Offshore O&G Platforms, Jack-ups etc., (offshore- and shipyards, oil and gas companies/operators) • Offshore Wind (offshore- and shipyards, e-energy companies/operators) • Boatbuilding (boatyards, shipyards) • Other marine and marine supply markets . Offshore underwater equipment and services . Traffic management, logistics support and environmental surveillance . Safety and security markets . Polar technologies, marine science technologies . Harbour technologies . Shipyard technologies

WP 6 Meeting 2014 © BALance Technology Consulting 2014

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Average World Market for Marine Supplies 149 bn €/a (2006 – 2010)

Annual national demand (Top 20) for marine supplies in mill. € Data: averages from OECD and Eurostat (2006-2010), OECD Input Output tables 2005, publications

Total global purchasingWorld volume: Market Marine 149,05 Supplies bn €EUR 149,05 billion/a

€ 40.000 (average 2006-2010) 3.223,72; 2% 10.736,70; 7% 5.750,81; 4% Asia - Total External Services 1.100,67; 1% 35.000 Asia - Total Half Raw Materials 22.333,73; 15% Asia - Total Components and Systems 30.000 34.523,13; 23% Europe - Total External Services 25.000 Europe - Total Half Raw Materials 58.913,24; 40% Europe - Total Components and Systems

20.000 RoW - Total External Services 8.999,34; 15.000 6% RoW - Total Half Raw Materials 3.464,68; 2% RoW - Total Components and Systems 10.000 5.000

0 Annual Annual domestic demand in mill.

WP 6 Meeting 2014 © BALance Technology Consulting 2014

The economic downturn created insourcing tendencies

Ratio purchase value / production value

Italy Germany Korea Japan USA EU 28 85%

80%

75%

70%

65%

60%

55%

50%

Source: OECD, Eurostat, BALance TC

WP 6 Meeting 2014 © BALance Technology Consulting 2014

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Value chains in shipbuilding: Major 1st tier suppliers consolidate and grow …

Horizontal Shipyard B, Shipyard A module factory „market level“ co-operation

Supplier Subcontractor Supplier Subcontractor Manu - Manu - Engineering Engineering Material Component Systems facturing Material Component Systems facturing Design Design Assembly Assembly „1st tier supplier“

Supplier Subcontractor Supplier Subcontractor Supplier Subcontractor Manu - Manu - Manu - Engineering Engineering Engineering Material Component Systems facturing Material Component Systems facturing Material Component Systems facturing Design Design Design Assembly Assembly Assembly „2nd tier supplier“

vertical, pyramidal co-operation

WP 6 Meeting 2014 © BALance Technology Consulting 2014

Value chains in shipbuilding: … and globalise their supply chains

Horizontal Shipyard B, Shipyard A module factory „market level“ co-operation

vertical, pyramidal co-operation

WP 6 Meeting 2014 © BALance Technology Consulting 2014

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Value chains in shipbuilding: More fragmentation and globalisation Material Suppliers Subcontractor

Sub-Assembly/Service ( ) Steel/Pipes/Paint …

Subcontractor Shipyards Design/Engineering

System/Component Subcontractor Suppliers Assembly/Service ( ) Manufacturer

+/- 30% +/- 30% +/- 40%

WP 6 Meeting 2014 © BALance Technology Consulting 2014

Europe Production Value

EU 28 + Norway + Turkey - Total Production in mill. € (average 2006 - 2010) - 61.8 bn € 14.000 (abt. 41,5% world production)

€ 12.000 EU-28 alone: 52,5 bn € 10.000 (abt. 35% world production)

8.000

6.000

4.000

Total Production Production in mill. Total 2.000

WP 6 Meeting 2014 © BALance Technology Consulting 2014

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Europe Export Value

EU 28 + Norway + Turkey - Total export value in mill. € - 27,43 bn €

8.000 abt. 44% of the production goes into export 7.000

€ abt. 33% is ex EU-28+N+TR export 6.000 abt. 11% is inner European trade 5.000 4.000 3.000 2.000

Export value in Export in value mill. 1.000 0

Source: Eurostat (average 2006-2010), BALance TC calculations

WP 6 Meeting 2014 © BALance Technology Consulting 2014

Globally >11.500 marine supplies companies exist based on analysis of certificates

N° of Companies in top 20 Countries 1.600

1.400

1.200

1.000

800

600

400

200

Source: BALance TC calculations

WP 6 Meeting 2014 © BALance Technology Consulting 2014

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Asian Manufacturere show significant growth rates in MED certificates 2010-2014

+ 125% + 125%

+ 16%

+ 120%

Source: MarED DB 10/2014 WP 6 Meeting 2014 © BALance Technology Consulting 2014

Future Projection Marine Supplies

Economic drivers and market outlook for 7 markets including market forecast 2013-2017 Shipbuilding, Shiprepair, Retrofitting, Naval Shipbuilding and MRO, Boatbuilding Offshore Oil&Gas, Offshore Wind

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Marine Supplies Market Forecast 2013 – 2017

• + 13,0 bn/a USD – Offshore Subsea Market – Drivers: Offshore O&G, World Energy demand, Energy mix, Long Term: Deep Sea Mining and Exploration, Marine Science • + Harbour Technologies, + Shipyard Technologies, + Coastal Engineering • + Marine Safety and Security Technologies, + Traffic Control Technologies • + environmental surveillance and cleaning, + Polar Technologies, Marine Science Technologies

Offshore (floating) dominates the shipbuilding market >130bn USD - ~32% Merchant Shipbuilding 2013-2017 [bn USD]

80.0 Total Orderbook Forecast 70.0 410 bn USD total shipbuilding value 60.0 252 bn USD marine supplies value 50.0

40.0

30.0

20.0

10.0

0.0

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Offshore ships clearly represent high value and marine supplies intensive ships

Marine Supplies Industry Structure Simplified Structure of 10 Supply Trades

1. External services and subcontracts - engineering, design and consulting services are covered, also subcontracts for pre-manufacturing or assembly. But, in many cases these are integrated in post-calculation data of material supplies or system/ equipment supplies, i.e. these are included in the following subcategories. 2. Materials – Steel (half raw materials, subassemblies) 3. Materials – Pipes and Ducts (half raw materials, subassemblies) 4. Materials – Paint, Coating (paints, painting services) 5. Systems/Equipment – Ship Operation (steering gear, anchor, deck machinery, life saving equipment, MARPOL equipment, general outfitting components) 6. Systems/Equipment - Cargo Handling and Processing Equipment Equipment and Special Cargo Plants (cranes, sucker, conveyors, cargo lift, hatch covers, Ro-Ro doors and ramps, trailerlifts, cargohold outfitting and fittings, HVAC for cargo holds, LNG/LPG plants, fishing vessel equipment, special equipment for dredgers, offshore ships equipment - production, processing, drilling, exploration, etc.)

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Marine Supplies Industry Structure Simplified Structure of 10 Supply Trades

7. Systems/Equipment – Accommodation (preprepared cabins, doors, windows, walls, ceilings, coverings, floor coverings, carpets, staircases, railings, lifts, sanitary rooms, swimming pool equipment, accessories, equipment for public rooms, pantry, bar, restaurant, kitchen, food storage, laundry, furniture and decoration etc.) 8. Systems/Equipment - Propulsion, Power Generation (diesel engines, boiler, steam turbines, gas turbines, gears and couplings, propeller, shaft and bearings, accessories, auxiliary engines (diesel), auxiliary boilers, etc) 9. Systems/Equipment - Auxiliary Systems, Apparatus & Accessories for engine operation, ship operation, cargo handling, accommodation (seawater cooling, fresh water cooling, fuel systems, lub oil systems, exhaust system, engine starting system, steam systems, heating systems, ballast water, fire fighting, deck washing, pressurized air, tank heating, cargo hold heating and cooling, cargo pumps, inert gas plants, tank cleaning, tank heating, drinking water, sanitation hot/coldwater/sewage, HVAC, waste disposal, swimming pool technology, general engine room outfitting, roll-damping, anti heeling systems, active stabilizers, etc.) 10.Systems/Equipment - Electrical Plants and Electronic Systems (main plants, generators, batteries, cable trays, cables, fittings, e-engines, lighting (all rooms and decks), electrical heating, alarm and control systems (ship automation, remote engine control, monitoring, cargo control, communication systems, nautical equipment (compass, radar, log, sat receiver, ECDIS, weather plotter), navigational lighting, entertainment systems (audio, video, cinema, theatre, meeting rooms, hotel management, clocks)

More than 50% of the demand is coming from China and Korea, followed by EU-27, Japan and rest of Asia with about equal shares and 12% for the rest of the world.

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The dominant supply trades are propulsion and power generation with about 45 billion USD, followed by cargo systems (35 billion USD), steel and auxiliary systems (both 30 billion USD) and accommodation with 21 billion USD

Korea creates the highest single demand for cargo systems, caused by the huge orderbook on offshore production and drilling vessels with extremely costly processing plants

Special Effect Offshore

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Europe creates the highest demand on accommodation systems, caused by the market leading orderbook for cruise ships and superyachts

Special Effect Cruise, Yacht

Economic Drivers

• Offshore is and remain a major driver • Niche Shipypes with high technology content (Pax, Chemical, RoRo, LNG, NCCV …) • Bunker Price •  Change of Paradigm: OPEX drives CAPEX • MARPOL VI, ECA’s – Nox, Sox, Particulates, EEDI • Ballast Water Convention •  Retrofitting or earlier replacement • Innovation and Technology

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Contact

• BALance Technology Consulting • http://www.bal.eu • Joachim Brodda • Bremen, Germany