The Business of Shipbuilding

George Bruce, Ian Garrard

• Publisher: Informa Law from Routledge
• Year: 2013
• Print ISBN: 9781859788516
• eBook ISBN: 9781317696872
• Topic: Education
• Subtopic: Education General

The Business of Shipbuilding thoroughly analyses vessel construction, from material receipt and preparation, to final outfitting. It explains the central role of computer technology in the design process, the growing importance of supply chain management for materials and services and the use of subcontractors. Methods of measuring progress, productivity, performance and the need for enforcing standards during construction are also discussed. Through the use of practical examples, The Business of Shipbuilding explains the structure of shipbuilding in Japan, Korea, the European Union, China, Eastern Europe and the Americas and places this in the context of the economic and political climate of each region.

Written in a clear and concise style and illustrated throughout with diagrams, charts and plans, The Business of Shipbuilding will be an invaluable reference tool both for experienced shipbuilders and for shipowners, managers, operators, brokers, insurers, lawyers, universities, surveyors and equipment suppliers.

CHAPTER 1

THE MARKET FOR SHIPS

DEPENDENCE ON TRADE

Any shipbuilding business, in common with any other business, can only operate in the context of the market demand for its products. That is therefore an appropriate starting point for a consideration of the business of shipbuilding.

The demand for new ships is, in turn, dependent on the trade requirements of the global economy. This, in turn, is a function of the state of the world economy, and in particular its rate of growth.

Trade is cyclical. Nevertheless, there has been a steady, long term increase in the volume of goods traded around the world, of which the vast majority move, as ever, in ships. Despite the huge increase in air traffic, for moving people and other cargoes which require speed, most trade is simply too bulky for air transport to be cost-effective. And even in such trades as passenger carriage, the decline of passenger transport on the long haul routes and some shorter ferry crossings has seen a replacement by carriage for pleasure in cruising, along with a comeback in the form of faster ferries.

However, the trend of increasing trade has seen regular increases and decreases. The cost of shipping is elastic, and minor changes in demand for ships to carry trade result in large changes in the charges shipowners can make. When these are low, the owner is unlikely to order a new ship, unless artificially persuaded to do so through some form of external support. Therefore the demand for ships is very sensitive to small changes in trade. If demand for ships drops marginally, the demand for new ships should stop abruptly and the prices available should fall. Prices have fallen over the last decades to levels where demand is stimulated by the ability of a shipowner to pick up a bargain, which is then readily resaleable when there is even a short term upturn in freight rates. Trade thus goes in cycles, where price reductions in the wake of falling demand eventually result in speculative buying.

The effect of the market on demand, and hence prices, should result in the least cost-efficient producers ceasing to operate, and there are plenty of instances of shipbuilding companies ceasing trading as demand has dropped. However, the underlying demand is always there, so recovery in the shipbuilding market will happen eventually. There is always a possibility of staying in business, accepting losses in the short term, and then making profits again during the inevitable recovery.

There is another factor, in the shape of governments. This is considered later in this chapter as one of the key external influences on the current shipbuilding market. The political context of the business of shipbuilding also deserves a complete chapter to itself, and this discussion can be found in Chapter 2.

Before reviewing the current market in more detail, it is worthwhile digressing briefly into its historical development.

DEVELOPMENT IN SIZE AND TYPES OF SHIP OVER THE LAST CENTURY

Over the last 100 years, the annual production of ships, measured in gross tons, has increased from some three million to around 17 million. That there is long term growth is thus apparent, although there are remarkable peaks and troughs. The periods of the two world wars saw massive increases in shipbuilding to fill increased demand and replace losses. The rapid increase in oil consumption in the 1960s and early 1970s, allied to the increase in ship size, with VLCCs becoming the norm, resulted in an even greater increase in ship construction. That boom ended with the oil price hike of 1973, and the legacy of over-capacity has plagued the industry world-wide since then.

To go back to the early years of the century, the typical ship was of around 4,000 tonnes deadweight. The word “typical” is appropriate, since most cargo was breakbulk, and most shipping operated on a short term basis according to available cargoes. Ships can therefore be characterised, in modem terms, as small and relatively standard.

There were of course a number of much larger ships at sea. These included the fast passenger ships, in particular the transatlantic liners. There were also large fleets of battleships, which were larger than the typical cargo ships, although relatively small by the standards of today’s VLCCs. But the industry was dominated by the smaller vessels, and there were relatively few large cargo ships. In fact, the Great Eastern, built half a century previously, remained the world’s largest ship for most of that time, and dwarfed the average cargo ship well into the twentieth century.

Since then, there has been a steady growth in average ship size, from the 4,000 tonnes deadweight of 1900 to the current figure of around 12,000 tonnes dwt. This change in average size conceals a more spectacular increase in the size of some ship types, in particular the bulk carriers and oil tankers. These have increased from a modest 5,000 tonnes dwt for the tankers and 4,000 tonnes for the bulk carriers, to the modem 50,000 tonnes dwt and 45,000 tonnes dwt respectively.

The largest tankers are now typically around 250,000 tonnes dwt, with bulk carriers somewhat smaller at 150,000 tonnes dwt.

In addition to the increases in ship size, there have also been changes in the types of ships. From the relatively standard general cargo ships of 1900, with a modest number of specialised types, there has been a proliferation of special purpose ships. Many trades and functions for which ships are built now simply did not exist in 1900. There is a diversity of ship types, and a large number which are built for specialist trades.

The world fleet is dominated by the large bulk carriers and tankers, at least in terms of tonnage, and these are the types where the over-capacity is most acute. There are also a number of very specialist niche markets, which have largely developed in the last 20 years. As these specialised types have developed, a number of shipbuilders have been among the first to construct them, often working in conjunction with the shipowner to develop the type. This has given the particular shipyards an initial competitive edge, which in some cases they have been able to maintain.

Some specialist types have remained in niche markets, but others, notably container ships, have generated a whole new set of trading patterns. In the development of this, the traditional dry cargo ship, which was the dominant type at the turn of the twentieth century, has become all but obsolete in the face of competition from the purpose-designed ships. These have far less flexibility, but their technological advantages, in particular in cargo handling to minimise port times, gave them a huge competitive advantage.

The changes in the shipbuilding market, in terms of the total tonnage, the increasing size of ships and the development of specialised ship types, have had a major impact on the shipbuilding business, as is discussed in the next section.

THE IMPACT OF CHANGE ON SHIPBUILDERS

The shipyards which existed in 1900 were designed to build the ships of their time. They were typically located on river banks, near but not necessarily very close to the sea. Location was partly dictated by access to a labour force, though to set up an industry, the labour could be imported and then trained in a limited range of skills. That was how the United Kingdom had initially gained the major share of the market for steel ships in the second half of the nineteenth century. It was also dictated by access to raw materials, particularly iron ore and coal, and to a modest infrastructure. The shipyards typically had many building berths, so that work could progress on many ships simultaneously. This was necessary, because the limited capability to lift ship parts resulted in piece by piece construction. Taking the numerous small parts to a building berth to be riveted into place one by one ensured a lengthy building time.

Although steel and steam power had been around for 50 years, the ships themselves had much in common with their iron, and previously wooden, ancestors. Apart from the materials, and the increase in size which this allowed (from a maximum of about 70 metres for wood, to a more typical 130 metres for steel in 1900), the methods ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Preface
• About the Authors
• List of Tables and Figures
• List of Plates
• 1. THE MARKET FOR SHIPS
• 2. POLITICAL INFLUENCES ON SHIPBUILDING
• 3. OTHER EXTERNAL INFLUENCES
• 4. SUPPLY IN THE SHIPBUILDING BUSINESS
• 5. SECURING ORDERS
• 6. THE SHIPBUILDING CONTRACT
• 7. SHIP DESIGN
• 8. MATERIALS AND SERVICES FOR SHIPBUILDING
• 9. SHIP PRODUCTION PLANNING AND PRODUCTION ENGINEERING
• 10. ORGANISATION OF SHIPBUILDING
• 11. THE PRODUCTION TECHNOLOGY
• 12. THE DEVELOPMENT OF SHIPBUILDING FACILITIES
• 13. QUALITY ASSURANCE
• 14. THE FUTURE DEVELOPMENT OF THE INDUSTRY
• Index