With competition from Asia, it always remains to be seen to what extent orders, including those from European shipowners, can be secured. However, in the coming years, shipbuilders will face a strong replacement demand for the construction of an average of 200 general cargo vessels for dry and/or mixed cargo between 75 and 149 metres each year.
In every issue of SWZ|Maritime, SWZ|Maritime’s editor-in-chief Antoon Oosting writes an opinion piece under the heading “Markets” about the maritime industry or a particular sector within it. In the February 2023 issue, he discusses the upcoming fleet renewal of the short sea fleet.
Of those 200 that will have to be built each year, about forty are destined for European shipowners, which is also the group on which shipbuilders in the north of Netherlands as well as other European shipbuilders rely heavily for their order books. Unfortunately, the days when Asian shipowners had their ships built in Europe are long gone and will not return any time soon.
That figure of 200 ships comes from an analysis by Michel Koopman, the marketing analyst of shipbuilding organisation Netherlands Maritime Technology (NMT), based on market data from IHS Fairplay and European shipbuilding interest group SEA Europe. He presented his analysis at an NMT network meeting last 15 December in Sneek, Friesland. For shipbuilders in the North, this is not unimportant because northern shipbuilders in particular are already competing for orders from this important shipping market.
At the moment, the three main shipbuilders, Ferus Smit, Royal Bodewes Group and Thecla Bodewes Shipyards are running quite nicely, but some slipways along the Winschoterdiep and in Friesland at Barkmeijer are still waiting for new orders. Royal Niestern Sander in Farmsum, after the fiasco with the construction of an icebreaker for a Russian client, is now building a ship for yard owner Wagenborg, but would of course also be happy with newbuilding orders from third parties.
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Restricted length of lock
The yards on the Winschoterdiep are limited to a width of 16 metres with their newbuilds due to the limited lock length and width of bridges. The 86-metre lock length seems to be less of a problem if the locks can be fully opened at neap tide. Ferus Smit in particular has built much larger vessels in the past, especially for Wagenborg at its own slipway near Leer, Germany. Niestern Sander can build ships of up to around 149 metres in length. The maximum length of the lock in the Eemskanaal at Farmsum is 144 metres, but it too can fully open at neap tide.
At Barkmeijer in Stroobos, located on the border of Groningen and Friesland, they can build at least up to a length of 136 metres as evidenced by the 2017 delivery of the Marietje Nora. Those ships enter the IJsselmeer via the Prinses Margrietkanaal near Lemmer and the North Sea via Amsterdam. At 8.2 metres wide, the lock at Kornwerderzand is far too narrow for larger ships. Also, the existing lock chamber is only 67 metres long.
Work is under way to enlarge the lock to 135 by 25 metres, wide enough for coasters to make Zwolle a real seaport. Incidentally, Thecla Bodewes now builds its larger ships mainly at Peters’ yard in Kampen. These can enter the North Sea via the Oranjesluizen and the North Sea Canal, and in the future via the new Lorentz locks at Kornwerderzand.
Sufficient slipway capacity
If underutilised slipways in the rest of the Netherlands are included – there is a complete, large IHC construction dock in Krimpen aan den IJssel that is in mothballs, or the slipway of bankrupt De Hoop in Tolkamer or a few more slipways in Heusden – there is enough dock and slipway capacity in the Netherlands to build quite a few extra ships.
The big question is just where to get staff in the rest of the Netherlands in particular. In the north of the Netherlands, this seems a slightly lesser problem for the time being. But even if a large part of the hulls were to be built in the east of Europe, or in Asia if necessary, you could still generate a lot of turnover for Dutch shipbuilders, suppliers and fitters during outfitting – and there are plenty of quays for outfitting, see also Urk and Harlingen.
Hence, Koopman’s analysis is quite interesting for Dutch and particularly northern shipbuilders. In his analysis, Koopman limits himself to general cargo ships from 75 to 149 metres. That fleet now comprises some 7800 ships of which about 1800 are owned by European shipowners (EU27, UK and Norway). If you also include all tankers and bulk carriers in that length category and smaller seagoing vessels below 75 metres, you arrive at a total of 18,000 ships, or 32 per cent of the world fleet of 55,000 ships.
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High average age
The average age of those 7800 cargo ships worldwide is 22 years. For European ships, it is slightly lower at eighteen years, but after that, ships age and depreciate quickly. Between 2000 and 2021, the average age rose sharply from 17.8 to 22.2 years. This is because, especially in the crisis years after 2008, shipowners were unable or unwilling to order many newbuildings.
On top of that, the banking crisis forced European banks to withdraw from ship financing largely due to European Central Bank (ECB) policies. Chinese banks have jumped into that gap en masse, but then, of course, a European shipowner has to have his ship built at a Chinese yard.
Assuming an average maximum lifespan of thirty years for this type of ship, that means 200 new ships are needed every year to maintain the current size of the fleet. Of those 200, European shipowners need forty. And 200 is considerably more than what has been built in recent years. Over the past ten years, the average number of ships built was 114 and in the last five years, not even more than about 100 were delivered each year.
Major competition from Asia
The big question is only this: how do you ensure that more newbuilding orders end up at European yards? Over the last five years, even in this category, superpower China has snatched the majority of these orders with 33 per cent, followed by the Japanese (26 per cent) and other mainly Asian yards (31 per cent). European yards did not get beyond a ten per cent market share in this segment.
The order book in the 75-149-metre category stood at 275 vessels in 2021. That year, 112 new orders were awarded and 123 ships were delivered. The hopes of northern Dutch shipbuilders and design firms are mainly focused on Dutch/European shipowners. In the Netherlands, this means Wagenborg, Spliethoff with subsidiaries Wijnne Barends and Finnish Bore, Amasus, Boomsma Shipping, Pot Scheepvaart, Navigia Group and Vertom UCS. European shipowners for whom the Groningen yards already build or have built many ships are notably Carisbrooke, Arklow Shipping, Erik Thun and Scotline.
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Economic Barometer
Incidentally, apart from IHC, things are not that bad now at all, especially when it comes to shipbuilding in the north of the Netherlands. At the end of January, NMT director Roel de Graaf was pleased to report that his organisation’s Economic Barometer of the Dutch maritime manufacturing industry shows that the order book increased in the last quarter of last year. The weakening growth seen in the previous measurement for the third quarter has not continued.
‘Many maritime manufacturing companies seem to have good business. That is good news. On the other hand, there are still many obstacles. In addition, price increases have not yet settled down. These issues unfortunately lead in some cases to the postponement of shipbuilding orders,’ said De Graaf.
The latest edition of the Economic Barometer is based on a survey of NMT’s 430 or so members, who together employ 30,000 people and turn over some EUR 7 billion a year.
In the survey, the Barometer distinguishes optimists and pessimists. Substantially more companies reported higher turnover (+34.3 per cent), a thicker order book (25 per cent) and even higher profitability (5.7 per cent) in the fourth quarter. Thus, the number of optimists grew by an average of 13 per cent. 68 per cent of companies in the maritime manufacturing industry expect to be in the black over last year. The remaining 31 per cent expect to break even or end with a loss over last year.
Much affected by chip shortage
According to the Barometer, many companies still suffer greatly from a shortage of production materials and labour. Respectively, 49 and 39 per cent of the respondents indicated that they suffer from this. For instance, there are still shortages of chips for electronic components. However, the number of companies saying they are greatly affected by this is decreasing, as the supply of chips is apparently picking up.
The rise in inflation last year is also not without consequences for the maritime manufacturing industry. Procurement prices increased for 84 per cent of respondents in the past fourth quarter of 2022. 57 per cent of respondents also had to increase their selling prices, which of course is not conducive to competitiveness. Unsurprisingly, 28 per cent of respondents also said they faced quite higher energy costs.
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