APAC Market for Maritime & Shipbuilding

Neil Dave, Consulting Analyst

Aerospace & Defense

6th December 2012

APAC Market for Maritime and ShipbuildingAPAC Market for Maritime and Shipbuilding

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6th December 2012

Focus Points

• Maritime Industry Overview

• Structure of Maritime Industry

• Key Characteristics & Trends of the APAC Maritime Industry

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• Major Challenges & Drivers faced by the APAC Maritime Industry

• Future Outlook and Key Takeaways from the APAC Maritime Industry

Maritime Industry – Overview

• Growth of the maritime industry is determined to great extent by global demand patterns,

which in turn affect shipping patterns, economic developments happening globally, and

natural events or occurrences which hinder growth of this industry.

• In recent times, global recovery from economic crises, unemployment and several natural

disasters in APAC countries such as Australia and Japan have taken a toll on the global

maritime industry.

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• However, the APAC maritime industry has managed to stay resilient during these tough

times by constantly evolving and finding measures to counter the negative impacts of

such economic and natural crises.

• By focusing on improving R&D activities and achieving diversification through innovation,

many countries in the APAC region have been able to counter the economic headwind.

• About 85% of the world’s total order book of new shipbuilding is constituted by China,

together with Korea and Japan.

• In 2011, the total volume of goods

shipped across the world reached

close to about 9 billion tons of cargo

in international seaborne trade.

• The recent economic recession took

a major toll on the global maritime

industry adversely affecting the

volume of cargo transported during0%

20%

40%

60%

80%

5000

6000

7000

8000

9000

10000

Development of International Seaborne Trade, 2011

Maritime Industry – Overview (Contd.)

Millio

ns

of

To

ns

4

volume of cargo transported during

2009.

• However, seaborne trade

experienced a significant upswing in

demand in 2010.

• This was particularly observed for

dry bulk and container trade

segments.

-80%

-60%

-40%

-20%

0

1000

2000

3000

4000

2006 2007 2008 2009 2010 2011

Oil Main Bulks

Other Dry Cargo New Order Growth Rate

Millio

ns

Maritime & Shipbuilding: Industry Structure, 2011

•The maritime industrycomprises of a few largecompanies existing with the restof industry participants made ofa relatively large number ofSMEs.

• Maritime is a complex sectorneeding support from manyplayers to run ships efficiently

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players to run ships efficientlyand safely.

• This sector is highly influencedby economic and tradedevelopments that take placearound the world.

• The diversified nature of theshipping industry does poseseveral challenges andparticularly its cyclic pattern.

APAC Maritime Industry – Key Characteristics

• The APAC region is becoming a key market for the maritime and shipbuilding industry

with many countries acknowledging the potential of the growing regional maritime

industry.

• Main competitors in the APAC maritime industry are China and Korea, both in an on-going

competition for 1st and 2nd place.

• Other countries becoming key shipbuilding nations include India and Philippines. These

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Other countries becoming key shipbuilding nations include India and Philippines. These

nations are leveraging incentives to secure their position as the growing maritime industry

players in the region.

• Indonesia is among the other lesser known countries that is taking heed of the potential of

this industry in the APAC region and is engaging in measures to increase its shipbuilding

industry.

• Average sizes of companies are the largest in China. In APAC, 20% of the largest

companies represent nearly 92% of the turnover.

APAC Maritime Industry – Current Key Trends

1. Focus shifting from domestic to international trade

Lesser known countries in the shipbuilding industry sch as Indonesia have been gradually

becoming successful in the domestic ship-building industry. To increase their footprint in

the industry such countries are now shifting focus from the domestic ship-building market

to international market.

2. Business Incentives in the form of cheap and skilled labor

Over the last few years, countries such as India and Philippines have been rising to

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Over the last few years, countries such as India and Philippines have been rising to

become shipbuilding nations in the region with incentives of cheap and skilled labor. This

is causing most countries to shift focus of shipbuilding to these low-cost countries for

shipbuilding activities.

3. Government initiatives to attract investors

Some of these initiatives include The Government of Philippines laying out investor-

friendly laws with attractive incentives to lure investors such as Hanjin of South Korea,

Tsuneishi of Japan and Keppel of Singapore. The Indian Government is offering a 30%

subsidy on all sales closed on foreign buyers and on local sales of ocean-going vessels of

longer than 80 meters..

APAC Maritime Industry – Major Challenges

Major Challenges for APAC Maritime Industry

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LaggingLabourProductivity

Unsustainable Export Oriented

Approach

Fragmented Regulatory Framework

Overreliance on Government

Projects

Green Growth Challenges

APAC Maritime Industry – Key Drivers

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APAC Maritime Industry – Key Drivers

• Initiatives Undertaken: Initiatives taken by governments and businesses will help further

the development of the regional maritime industry. For instance tripartite models of forging

partnerships undertaken by countries like Singapore are a shining example of how

to overcome the drawbacks of a sluggish global economy.

• ASEAN Economic Community (AEC): The commitment by Singapore, Malaysia,

Indonesia and Vietnam to implement the ASEAN Economic Community (AEC) by 2015

will grow ASEAN into a highly competitive and connected economic region. Production

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will grow ASEAN into a highly competitive and connected economic region. Production

and distribution networks will be widened and deepened, thereby supporting the maritime

industries among ASEAN member countries.

• Low Cost Leadership with R&D Innovation: Low cost-leadership alone, will not

continue to sustain competitiveness in the maritime industry. To keep up with competition

from western nations, certain APAC countries are adopting implementation of R&D

innovation along with low labour costs to gain a strategic advantage. This is a major

factor helping companies sustain their market presence during adverse conditions.

Future Outlook

• The International character of the industry and its cyclical pattern are certain to slow

regional growth in the near future.

• However, the outlook for Asia remains bright. This is largely attributed to initiatives taken

by businesses and governments in the region.

• Other main factors include the opening of distribution and trade routes in the ASEAN

region with the implementation of the ASEAN Economic Community (AEC) initiative.

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• Several port development programs are being undertaken in countries such as Malaysia

and Indonesia which are beginning to witness an increase in cargo throughput

• Low cost leadership will shift from countries like Korea and Japan to China and other

emerging shipbuilding nations like Vietnam, Philippines and India. Korea and Japan.

• However, to keep up with overall increasing labour costs and competition from the EU and

US in these costs, several APAC nations will seek to strengthen their R&D and technical

innovation capabilities to keep up with the competition.

Conclusion : Key Takeaways

2To counter the influence of these external factors in light of APAC’s competitive landscape, businesses and governments need to collaboratively formulate their responses.

Close cooperation in shipbuilding and the marine equipment supply industry

1Shipbuilding is mainly affected by macro factors such as oil prices, economic/political stability, world seaborne trade and market factors such as government subsidies, scrapping old vessels, vessels on order and pricing.

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3Close cooperation in shipbuilding and the marine equipment supply industry will further bring about the much needed changes that are vital to beat the volatile market.

4There is a lack of protectionist policies by governments in the APAC region

required to safe-guard interests of shipbuilding companies which is expected to

be a growth restraint unless corrected.

5Continuous evolution and innovation is required to be undertaken by maritime and

shipbuilding companies to prepare themselves to counter possible future impacts

from changing macro-economic factors and natural calamities.

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Today’s Presenter

Neil Dave, Consulting Analyst

Frost & Sullivan

Neil is a consulting analyst with the Aerospace and Defense practice at Frost &

Sullivan. He works with clients on market strategy, best practices, opportunity

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For any other enquiries, email us:

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Sullivan. He works with clients on market strategy, best practices, opportunity

analysis and competitive intelligence analysis across various sectors in the

Aerospace & Defense Industry as well as other industries which include ICT,

Healthcare and Electronics & Security.