Indian Shipbuilding-Whither Bound ? i-maritime Consultancy Private Limited

Indian Shipbuilding- Whither Bound ?

i-maritime Consultancy Private LimitedNovember 25, 2005

25-Nov-05 i-maritime 2

Contents

1. Heaven on Earth

2. Indian Shipbuilding

3. Current Order Book

4. Current Order Book – Public Sector Shipyards

5. Current Order Book – Private Sector Shipyards

6. Market Dynamics – Existing Yards

7. Future Boom

8. Competitive Advantage India

9. Indian Shipbuilding vis-à-vis Far East Shipbuilding

10. Shipbuilding vis-à-vis Other Industry

11. Capacity Expansion Plans of Indian Yards

12. New Yards Proposed

13. Government’s Policy Initiative on Shipbuilding


Heaven on Earth

I chanced upon this endless stretch,

which they think is a barren land.

Not for mortals to appreciate nature’s bounty,

it’s only the fortunate who this exquisite

fertility understand.

Dear fellowmen I want to share this treasure,

lets build a sprawling port,

ships and a few leisurely boats,

and on earth too we shall dwell in heaven.

Tarun Agarwal


Indian Shipbuilding

� The present Indian order book, 977,400 DWT corresponding to 0.42 % of world order book of 230 million

DWT

� The present order book of 91 ships corresponds to about 2 % of the world order book of 4712 ships

� India has risen to the rank of 8th in terms of order book globally.

� Clarksons ranks Indian Shipyards, ABG and Bharati 5th and 8th globally in terms of the order book, in

offshore segment

� Clarksons ranks Indian Shipyard, Chowgule 4th globally in terms of the order book, in general cargo

segment

91

13

11

20

16

31

By Type

716

41

140

180

108

247

68

6

11

18

6

27

ExportNo US$ mn

354

84

-

15

222

33

23

7

-

2

10

4

DomesticNo US$ mn

1070

125

140

195

330

280

TotalUS $ mn

Current order bookVessel type

Product Tankers

Others

Total

MPP

Large Bulkers

Offshore Vessel

Sl

No

Name of

Country

No of

Yards

No of

ships

DWT Avg.

DWT

1 South Korea 26 1160 82,179,410 70,844

2 Japan 63 1062 75,185,562 70,796

3 China 70 969 43,648,876 45,045

4 Germany 18 215 4,543,061 21,131

5 Vietnam 8 82 1,583,600 19,312

6 Netherlands 13 139 1,125,230 8,095

7 Russia 13 63 1,069,581 16,977

8 India 7 91 977,400 10,741

9 Turkey 23 111 970,834 8,746

10 USA 15 42 865,982 20,619

Ranking in terms of order book globally

Source: i-maritime study Based on clarksons


Current Order Book

� Current Order Book dominated by vessels

of less than 10,000 DWT

� Shipbuilding Order Book has crossed US$

1 billion

� US$ 330 million in Bulk cargo

� US$ 280 million in Offshore sector

� US$ 140 million in Product tankers

� US$ 195 million in Multi-Purpose product

� US$ 125 million others

� Export orders are from European owners,

(not from Far East nations)

� 2/3rd of total revenue from export

Vessel type Yards DWT Nos. Owner

53,000 6 Good Earth Maritime

30,000 4 Good Earth Maritime

Cochin 30,000 6 Clipper Group

3 Apollo Shipping

6 Union Transport

3 Befracht Schoning

3,600 2 SKS Shipping

Bharati 6,500 6 MK Shipping bv

500 passenger vessel ABG - 1 A & N Administration

Cutter Suction Dredger Bharati - 1 Adani Dubai

Pipe laying barge ABG 1 Maridive Offshore Proj.

12,800 8 Sea Tankers *3,000 2 Gudami International

Bharati 5,250 1 Al Jaber International

1,700 2 Halul Offshore

2200 3 Great Offshore

2,500 1 Great Offshore

1500 6 Sea tankers management

3 Tag Sea-logistics

AHT ABG 5 Maridive Offshore Proj.

Cochin 3500 4 Fredriksen Group

Bharati 2200 2 Groupe Bourbon

OSV ABG 1300 1 Vroon bv

Diving Support ABG 1000 1 Maridive Offshore Proj.

Prod. Support Vessel ABG 2 Lamnalco

Pollution control vessel ABG 3 Indian Coastguard

50 Ton BP Tug ABG 1 Pacific First Shipping Pte. Ltd.

Ro-Ro Bharati 5000 2 Sea-Cargo AS

Ro-Ro/Lo-Lo Bharati 5000 2 Nor-Lines AS

Dual barge ABG 3 Essar steel

91 * 4 on order, 4 optional

Bulk carrierHindustan

Multi-PurposeChowgule

Alcock

AHTS

Bharati

ABG

PSV

Total

4,450

Product tanker


Current Order Book- Public Sector Shipyards

Cochin Shipyard Ltd.

Type Nos.

1 Bulk carrier 6 30,000 240000 105.3

2 PSV 4 3,500 14000 44.1

Total 10 254000 149.4

DWT

Total

DWT

Estimated

Cost in US

($ million)

Hindustan Shipyard Ltd.

Nos.

1 Bulk carrier 4 30,000 120000 70.2

2 Bulk carrier 6 53,000 318000 152.1

Total 10 438000 222.3

DWT

Total

DWT

Estimated

Cost in US

($ million)Type

Alcock Ashdown Gujarat Ltd.

Type Nos.

1 Product tanker 4+4 12800 102400 122.9

2 Product tanker 2 3000 6000 8.8

Total 2 108400 131.6

Total

DWTDWT

Estimated

Cost in US

($ million)

131.6108,400Alcock Ashdown (Guj) Ltd.3

503.3800,400Total

149.4254,000Cochin Shipyard Ltd.2

222.3438,000Hindustan Shipyard Ltd.1

Value

US$ million

DWTPublic Sector YardsSl.

No.


Current Order Book- Private Sector Shipyards

Bharati Shipyard

Type Nos. DWT

1 MPP 6 6250 37500 81.9

2 Product Tanker 1 5250 5250 7.7

3 Ro-Ro/Lo-Lo 2 5000 10000 8.8

4 PSV 2 1200 2400 15.9

5 AHTS 2 1700 3400 12.4

6 AHTS 3 2200 6600 23.9

7 AHTS 1 2250 2250 8.8

8 Ro-Ro 2 5000 10000 8.8

9 Cutter Suction Dredger 1 - - 3.3

Total 20 77400 171.4

Total

DWT

Estimated

Cost in US

($ million)

Chowgule Shipyard

Type Nos. DWT

1 Multi-Purpose Gen. Cargo

(MPP) 2 3600 7200 15

2 Multi-Purpose Gen. Cargo

(MPP) 12 4450 53400 96

Total 14 60600 111

Total

DWT

Estimated

Cost in US

($ million)

ABG Shipyard

Type Nos.

1 500 pax Passenger Vessel 1 18.0

2 Pipe-laying Barge 1 7.03 AHT 5 45.0

4 AHTS 6 54.0

5 AHTS 3 34.5

6 OSV 1 8.5

7 Azimuthing Prod. Support 2 17.0

8 Diving Support Vessel 1 11.5

9 Pollution Control Vessel 3 80.0

10 50 BP Tug 1 4.5

11 Dual Barge 3 1.1

Total 27 281.1

Estimated

Cost in US

($ million)

111.060,600Chowgule3

563.5183,000Total

171.477,400Bharati Shipyard Ltd2

281.145,000ABG Shipyard Ltd.1

Value

US$ million

DWTPrivate Sector YardsSl.

No.


Market Dynamics- Existing Yards

� ABG, plan to build large conventional vessel

segment after their proposed expansion

� Bharati will build more specialised vessels in

small and mid segment

� Chowgule, through tie-up and expansion

plan take up specialised vessels in small

and mid size.

� Cochin shipyard devoted to Air Craft Carrier,

Can take up large conventional vessel after

their expansion

� Smaller shipyards will take up the void

space created created by Bharati, ABG,

HSL, CSL and Chowgule

Specialised Conventional

Large

Small

Public Sector Private Sector

Not to scale

Size of the circle denotes the turnover (2003-04)

AAGL Alcock Ashdown Gujarat Ltd.

AML Alang Marine

BSL Bharati Shipyard Ltd.

CSE Chowgule & Co. Ltd.

CSL Cochin Shipyard Ltd

DSE Dempo Shipbuilding & Engg. Co.

HSL Hindustan Shipyard Ltd Source: i-maritime research

CSL

HSL

ABG

AAGL

AML DSE

BSL

Large

Specialised

Vessels

?

CSE

Large

Conventional

Vessels

?


Future – Boom

1080 ~ 150025090Turnover

Order Book 3000 ~ 50001070200

2009-10

US$ mn

2004-05

US$ mn

2000-01

US$ mn

3003012513Others

9002514011Tanker

10003033016Bulk Carrier

8005028031Offshore

US $ mNoUS $ mNo

2009-102004-05Order book

Is India competent to attain this growth ?

Red colored fields are i-maritime estimates


Competitive Advantage of India

Global Shipbuilding Competitiveness Index – in the Past

Global Shipbuilding Competitiveness Index – in the Present

i-maritime research

Global Shipbuilding Competitiveness Index – in the Future

Factors Affecting the Shipbuilding Industry

Country

Steel &

Equipment

Capital

Markets &

Banking

Labour

Unit

Cost

Technology

Used

Support

(by Govt.)

Weighted

Score

Competitiveness

Ranking

S. E. Asia 2.0 2.0 3.0 3.0 2.0 2.4 2

W. Europe 4.0 4.0 1.0 4.5 1.0 2.3 3

E. Europe 3.0 2.5 3.0 3.0 1.0 2.4 2

China 4.5 4.0 4.0 4.0 3.0 3.8 1

India 2.0 3.0 2.0 2.0 1.0 1.8 4


Country/Region

Steel &

Equipment

Capital

Markets &

Banking

Labour

Unit

Cost

Technology

Used

Support

(By Govt.) Weighted

Score

%

Competitiveness

S. E. Asia 2.0 2.0 3.0 3.0 2.0 2.4 2

W. Europe 4.0 4.0 1.0 4.5 1.0 2.3 3

E. Europe 3.0 2.5 3.0 3.0 1.0 2.4 2

China 4.5 4.0 4.0 4.0 3.0 3.8 1

India 2.0 4.0 2.5 2.5 2.0 2.4 2


Country

Steel &

Equipment

Capital

Markets &

Banking

Labour

Unit Cost

Technology

Used

Support

(by Govt.)

Weighted

Score

Competitiveness

Ranking

S. E. Asia 2.0 2.0 3.0 3.0 2.0 2.4 3

W. Europe 4.0 4.0 1.0 4.5 1.0 2.3 4

E. Europe 3.0 2.5 3.0 3.0 1.0 2.4 3

China 4.0 4.0 4.0 3.0 3.0 3.6 1

India 3.5 4.0 3.0 3.0 3.0 3.2 2


Indian Shipbuilding vis-à-vis Far East Shipbuilding

� Equipped with in house Design & Engineering capabilities, outsourcing is limited.

� Fully developed R&D centers locally with model testing tanks, etc.

� Build large conventional and large specialist vessels.

� CAD/CAM and ERP use to a greater extent, they are moving towards Computer Integrated Manufacturing.

� Appropriate training and induction process are practiced to maintain the inflow of quality man power.

Far East Shipbuilding(Japan, Korea, China)

� New Design Facilities

� Keppel has opened its design office

� AB Marine getting global

� L&T- ship design

A Good Beginning

� R&D facility to be generated. (NSDRC &

NSTL can take up such a task jointly)

� Yards expanding for large conventional vessels.

� CSL, HSL, ABG and Chowgule are

outsourcing their detail engineering. It’s a good beginning can take up in house detail engineering at later stage.

� India has largest number of non resident & non practicing Naval Architects. Lucrative & Work friendly environment to be created for young graduates to take up shipbuilding assignments locally.

What is being/needs to be done?

� Unavailability of Design & Engineering capabilities

� No exposure to R&D

� Confined mostly in small conventional & small specialized vessels.

� Use of CAD/CAM and ERP limited

� Scarcity of qualified professionals.

Technical aspect

Indian Shipbuilding


Indian shipbuilding vis-à-vis Far East shipbuilding

� Automation at various stages

and deskilling of production

process

� High labour productivity

� Local availability of raw material

� Developed infrastructure

� Efficient supply chain

management

Far East Shipbuilding(Japan, Korea, China)

� HSL has acquired 3 more NC cutting machine, ABG,CSL, etc have it and others will acquire in their expansion process.

� Cannot have local availability of raw materials unless volume increases

� Labour productivity needs to be looked into seriously.

� Supply chain has to be strengthened

What is being/needs to be done?

� Labour oriented, skill based

production process

� Very low labour productivity

� 80% of raw material imported

� Poor infrastructure

� Inefficient supply chain

management

Operational aspect

Indian Shipbuilding


Shipbuilding vis-à-vis other Similar Industry

√

√

√

Sub-contracting support

√√√√Shipbuilding

√√√√Light Engineering

√√√√Automobile

Cluster-based growth

Supply chain management

Assembly Industry

Labour intensive

Industry

India competitive advantage that led to growth of Automobile industry & software available to Shipbuilding

• Reliable network of sub-contractors and vendors• Supply Chain Management

• Skill levels and managerial competence

• Engineering expertise

• Infrastructure. logistics & connectivity

• Reform process

• Stable business, commercial and legal environment and policy support

To be strengthened

further in shipbuilding

Shipbuilding Process

Ship Design Process

√√√Shipbuilding

√√√Light Engineering design

√√√Software

Value added serviceKnowledge baseInnovationIndustry


Capacity Expansion Plans of Indian Yards

� Cochin Shipyard: planning to invest around Rs. 1.6 billion to develop:

� Open building space with provision for launching powered by a hydraulic system;

� Additional fabrication facilities

� 20-30% increase in the yard’s capacity.

� ABG Shipyard: investing Rs. 3.75 billion for setting up a new shipyard in Dahej, Gujarat. It

is expected to be operational by 2007. The new yard will be able to:

� Build vessels up to 300 m length, including Aframax and VLCCs

� Adopt state-of-the-art shipbuilding technologies and

� Production integration through CAD/CAM & ERP

� Bharati Shipyard is investing in expansion and modernization of its Ratnagiri shipyard at

an estimated cost of Rs. 650 million. On completion, the yard will:

� Build vessels of a maximum length of 170 m, including Handysize

� Have a dry dock of 176 x 33meters instead of wet dock

� Raise the capacity of its gantry crane to 120 tons with a span of 50 meters


New yards proposed

Pipavav Shipyard

� Sea King International Limited (SKIL) announced plans to establish a large shipbuilding yard. Last year, there

were reports that the company was negotiating with some of the leading international shipyards. SKIL is

considering development of its 200-acre land at Pipavav, Gujarat, to build four docks of 350-metre by 65-

metre size. The docks would be able to build, repair and dry dock VLCCs, ULCCs, LNG carriers, offshore

platforms, rigs and large container ships.

Adani Shipyard

� The Ahmedabad-based, Adani Group owned shipyard plans to build a ship repair and shipbuilding yard at

Mundra in Gujarat involving Rs. 16 billion (US$ 364 million). The facility will build vessels of diverse ranges —

tankers, bulkers, container ships — and sizes up to 100,000 dead-weight tonnage (DWT). The operations are

expected to commence in 2007.

L&T Shipyard

� India’s engineering construction giant, Larsen and Toubro is said to be pressing ahead with its plans for

building a large shipyard capable of building conventional merchant vessels. Unconfirmed reports list

Mangalore and Pondichery as possible locations. L&T is also one of the bidder for take over of the shipyard of

Alcock Ashdown Gujarat Ltd., at Bhavnagar. L&T has already made forays into naval ship construction and

ship design services.


New yards proposed

Cochin Port Trust plans a large shipyard

� Cochin Port Trust (CoPT) has floated a global tender, inviting international shipyards to set up a ship repair-

cum-shipbuilding yard at Cochin. CoPT plans to execute the project through either the Build, Operate,

Transfer (BOT) or the Joint Venture (JV) route. An area of 19.2 hectares has been earmarked in the Special

Economic Zone (SEZ) of the Puthuvypeen region. The yard would be able to build Panamax vessels and

VLCCs.

All major ports in India are expanding, with shipyard facility as an integral part of their

business plan.


Government’s Policy initiatives on Shipbuilding

� Reserve Bank of India now releases foreign exchange for ship repair/dry docking and spares for

imported capital goods without any value limit.

� 30% subsidy for export orders of all sizes and domestic orders in case of vessels of lengths 80 m

and above (effective till April 2007). We estimate it to be 15% after 2007 and phase out after 2012.

� 100% FDI allowed in shipbuilding and Joint Ventures encouraged

� National Maritime Development Policy (NMDP), which has not been ratified yet, envisages:

� Foreign Direct Investment (FDI) in shipbuilding and ship repair activity.

� Duty free import of all equipments to be fitted in ships built at Indian yards.

� Long term subsidy support (up to 20-30 years).

� Support to ensure availability of indigenous steel for all Indian shipyards.

� The proposed policy would encourage ancillary units to support ship repairs and ship construction. Without

strong ancillary back up, the shipbuilding and ship repair will not be able to generate additional employment

and compete with global shipyards.

� PSU shipyards to be given freedom to device their own procedures for procurement and make them

comparable with the private sector.


Thank You

Indian Shipbuilding-Whither Bound ? i-maritime Consultancy Private Limited

Documents