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Reaching China’s shipyards: Lessons from Marintec

December 13, 2019

China’s biggest marine technology exhibition offers clues for companies looking to build their business in the world’s leading shipbuilding market, writes Wake Media head of content Gavin Lipsith.

It’s big, it’s dirty (but getting cleaner) and its people drive a tough bargain. If shipping were a city, Shanghai might just be it. It is also the commercial heart of a shipbuilding superpower; by all measures bar one (of which more later) China is the world’s biggest shipbuilding country. Little wonder then that Marintec China in Shanghai pulls the crowds; the exhibition was expected to draw an incredible 65,000 visitors, with 2,200 exhibitors occupying more than 90,000sq m of space.

Even those numbers may seem like an underestimate to those who braved the throng as the exhibition opened its doors each day between 3-6 December 2019. But if visitors were extra keen to get in this time, there was good reason. According to Dr Martin Stopford, non-executive president of Clarkson Research, the growth that has propelled the market to shipbuilding dominance is far from over. Not only does China claim a world-leading 36% of gross tonnage built in the past 12 months, it also has the biggest orderbook at 26 million compensated gross tonnes.

Add to those statistics the fact that China is the world’s second biggest investor in new ships, spending US$6.2 billion in 2019 to the end of October, and it is clear why ship technology suppliers have Chinese shipyards and owners in their sights. But it has not always been easy for companies to break into this potentially lucrative market. Now further challenges could emerge from two major dynamics: shipyard consolidation and a drive towards higher-value shipbuilding.

Shipyard shake-up

Shortly before Marintec, the two state-owned shipbuilding giants – China State Shipbuilding Corp (CSSC) and China Shipbuilding Industry Corp (CSIC) – merged to form China Shipbuilding Group. Once again, the numbers are mind-bending. The combined group has around 150 shipbuilding and repair yards, nearly 300,000 employees and assets valued at around US$110 billion. And it was keen to show that strength at Marintec, occupying 3,900sq m of exhibition space – around 4.3% of the total area. The power of the new company was highlighted again on the third day of Marintec when the group revealed that it had been awarded shipbuilding and financing contracts worth US$4.2 billion during the show.

For brands looking towards China this mega-group – representing 20% of global shipbuilding – is now the big target. But will outside technology companies will see their businesses eroded as China Shipbuilding Group develops its internal resources? As Dr Stopford noted at the Marintec Opening Press Conference: “New shipping and shipbuilding technology for vessel management and propulsion will feature prominently in the 2020s. The recent consolidation of shipbuilding groups in China is well timed to provide research and investment on the scale needed to meet this challenge.”

There were numerous examples of this investment amid the 60 exhibitors operating under the China Shipbuilding Group umbrella. Engine designer WinGD presented the biggest Otto-cycle dual-fuel engines ever built – the 12X92DF engines under construction at CMD in Shanghai – to a group of customers before the show. The engines will power nine 21,000 teu vessels, the first ever LNG-fuelled ultra-large container ships, being built for CMA CGM elsewhere in China, at Jiangnan Shipyard and Hudong-Zhonghua Shipbuilding. Another subsidiary, CSSC Marine Service, presented its retrofit solution for two-stroke engines to prevent engine start issues when using low-sulphur fuels with lower viscosity; an important offering given the fact that most of the world’s ships will be operating on such fuels from 1 January 2020.

High-end hopes

With its growing strength it is inevitable that the Chinese shipbuilding industry will increasingly both develop its own solutions and acquire technology businesses from overseas. But there is still space for external suppliers to flourish. One example is provided by the country’s drive towards producing more technically sophisticated ships. While China is indeed the biggest shipbuilding country by gross tonnes, compensated gross tonnes and deadweight, it is only the second biggest by dollar value – claiming 27% of the market compared to South Korea’s 30%.

China’s shipbuilders are determined to win the dollar crown and have turned their attention to high-value ships. Two sectors highlight this ambition: the cruise segment, which was amply represented on the Marintec conference agenda; and LNG carriers, for which China will soon have pressing need as its domestic energy mix relies increasingly on imported natural gas. While Chinese yards are building their first cruise ships, the first LNG carrier contracts have yet to arrive, although several gas-fuelled projects have already been delivered.

Class society DNV GL noted that Chinese yards are moving rapidly towards this goal, delivering increasingly complex ships. Regional general manager Norbert Kray highlighted the delivery of the dual-fuel ro-ro Stena Estrid from China Merchants Group in November and the intelligent combination carrier Baru delivered to Klaveness from New Yangzi Shipyard in January. China’s LNG ambitions remain in place, exemplified by the construction of the world’s biggest bunkering vessel, a 20,000m3 vessel for Stolt-Nielsen, at Nantong CIMC SinoPacific Offshore & Engineering.

DNV GL is one company hoping to leverage its digital expertise to win business at Chinese yards as they seek to build more sophisticated vessels. The establishment of an artificial intelligence research centre in Shanghai is one example of investment directed towards this goal. So too is a current project with Guangzhou International Shipyard to develop an intelligent, machine learning driven methodology for welding inspection.

Wärtsilä also used Marintec to emphasise its ‘smart marine ecosystem’ approach, using one particular vessel type built at Chinese yards to show how its technologies are being used to increase efficiency. On the opening day of the exhibition the company revealed details of an extensive package of propulsion and controls to be delivered for two state-of-the-art dredgers to be built at Fujian Mawei Shipbuilding for Dutch shipowner Spliethoff. The Finnish group also signed an agreement with CSSC Huangpu Wenchong Shipbuilding to jointly develop hybrid vessels, starting with dredgers.

Bringing digital technology and connectivity to marine equipment is one area in which OEMs can help Chinese shipyards to upscale the sophistication of their newbuilds. This was the focus of ABB Turbocharging’s offer during Marintec; the company is leveraging its turbocharger and engine expertise with the engine performance monitoring suite Tekomar XPERT. But as ABB Turbocharging vice president digital customer solutions Cristian Corotto told delegates at the Marintec Senior Maritime Forum, it is not just the technologies but a shift in skillsets and business culture that will determine how much value companies can drive from digitalisation. This neatly encapsulates the development Chinese shipyards are starting. Buying in technology is one element. Understanding how to harness digitalisation to build better ships is a much wider challenge.

Focus on quality

But while new technologies will be an increasing focus for shipyards, there will always be opportunity for suppliers who can improve the design of well-established ship equipment. The LNG fuel management system is one important example, particularly as China expands its expertise in gas-fuelled ship construction. Alfa Laval used Marintec to explain the role of dual-fuel boilers in managing boil-off gas on LNG-fuelled vessels. While there are other options for managing boil-off, boilers are already needed on most ships and are competitive compared to other options. But boilers need to be reliable if they are to be used not just as ancillary heat generators but as an essential part of the gas safety set-up.

Alfa Laval’s bulker-fit version of its PureBallast 3.0 ballast water management system is another example of ship equipment upgraded to meet market demands – and particularly relevant to China given the huge number of bulk carriers built at its yards. The system addresses the challenge of differentials between ballast water inflow and outflow by reorganising filtration – saving on system cost in the process.

For marine technology brands looking to build their business in the world’s biggest shipbuilding market, there is no single solution. Shipyard consolidation may make things simultaneously simpler, with fewer companies to target, and more difficult, given the huge buying power Chinese yard groups now exert. But there are key trends for suppliers to tap. The most apparent are for digital and gas-related technologies as China drives towards building more technologically advanced ships. But these are just two examples. For top-quality suppliers with the ability to tailor their offer to the needs of China’s yards and owners, demand will grow with the market.

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