Blasting the competition

With yards working at full capacity across the region, SFME speaks to industry leaders to root out what’s driving the profitable ship repair business.
Blasting the competition
By Staff writer
Fri 01 Dec 2006 12:00 AM

• Ship repair volumes and earnings are rising across the region, and the industry is expanding at a rapid rate.

Enhanced levels of international custom prove that Middle Eastern companies can now compete with the best yards in the world.

The current situation in the Middle East sees many yards working at 98% capacity.

A reputation for delivering repair work of the highest quality has led to unprecedented levels of demand, and is forcing the industry to grow operations in every realm of ship repair.

The Bahrain based Arab Shipbuilding and Repair Yard (ASRY) recently announced it expects net operating income to reach US$135m by the end of 2006, compared to $111m last year.

ASRY revealed that its docks worked in excess of 98% capacity in all of its capital facilities for the first half of the year, with sales revenues up 23% in the same period in 2005.

Steel work repairs and renewals jumped 70% to 4,300 tonnes, and an impressive total of 4.11 million dwt of vessels were successfully repaired in just six months.

This is indicative of the industry boom, and the concurrent profits now being generated in the Middle East has not failed to attract the interest of international firms.

It has been announced that South Korea’s Daewoo Shipbuilding and Marine Engineering has won a ten-year contract to manage a new ship-repair yard in Oman, resulting in further competition in the region.

The Oman Dry Dock facility will be ready in 2009 and will run in direct competition with UAE businesses.

The likelihood is that as long as repair yards are working so close to capacity, foreign interest will continue to intensify.

Ship repair carried out in the region now covers the full remit of ship conversions, overhauls, maintenance programmes, and major damage repairs.

The repair and conversion market is booming thanks to a combination of ageing commercial fleets that are now being overhauled to meet IMO environmental standards.

High oil prices have generated an increase in demand for floating production storage and offloading (FPSO) vessels for marine oil industry.

As smaller wells have become profitable to drill, international investment in this sector has energised the repair and conversion market, and global operators are turning to the Middle East as a centre of excellence to have this work carried out.

“We’ve had a fantastic year, and seen a considerable rise in turnover in the repair and conversion sector of the business,” boasts Geoff Taylor, chief executive, Dubai Dry Docks.

“For conversion to FPSO ships we have work booked for the next 25 months.”

With the industry in full swing, repair works are being booked for the full range of commercial ships from tugboats right up to ultra large/very large crude carriers – and container ships.

Ship owners from around the world have woken up to the advantages of having work carried out in the Gulf, which offers quick turnaround times and full service support, whilst many facilities are located at the heart of the world’s fastest expanding transhipment hub.

The level of business in the region is keeping the leading yards at near full capacity.

“We’ve established ourselves in the UAE but don’t even need to look beyond Abu Dhabi to keep our yard at full stretch.

This year we’ve worked on 160 commercial ships, and next year that will rise to around 200,” says William Stewart, vice president, Abu Dhabi Ship Building (ADSB).

“It’s testament to the health of the industry that we’re exceeding targets without chasing contracts, it’s a fantastic position to be in because the business comes to us.”

The situation seems much the same in neighbouring Dubai.

“Our current facility is 25 years old, and the only thing that’s stopping us from accepting more business is the size and docking constraints, but our handling capacity will increase dramatically with the move to Maritime City,” explains Jamal Abaki, general manager of Grandweld.

However, even with the rising cost of doing business in the UAE, regional players are unfazed by cheaper alternative facilities on the subcontinent.

“We are able to offset lower cost competition because we have an excellent reputation for quality, and with ship repairs and servicing our clients require very high levels of reliability,” Abaki elaborates, “We’ve built an excellent reputation for the quality of our end goods and the after-sales commitment - also the ability to support the client when they charter a vessel is very reassuring to them.”

Despite military orders making up the majority of the ADSB order book, the surge in commercial business has actually kept down its naval build capability this year.

“We went way over target last year in the commercial sector,” says Stewart.

“We’ve a great relationship with ESNAAD and IRSHA, the Abu Dhabi National Oil Company subsidiaries, and we won a 3 year contract for the maintenance of their service vehicles,

so even though ADSB is moving away from the commercial side, the orders keep coming.”

In dealing with such rapid expansion it has to be conceded that the ensuing increase of heavy industry will have a detrimental impact on the environment.

However, despite the inherently dirty nature of ship repair, there are firms in the Middle East region with surprisingly green ambitions.

During the repair process paint is commonly removed from hulls by blasting it off with abrasive grit, typically copper slag.

Open air dry grit blasting results in considerable dust emissions that pollute air and water if not contained. Grit and paint chips can enter nearby coastal waters.

Open blasting is banned in Europe, where ultra high pressure water jet blasting

has become the industry standard for outdoor operations.

The Dubai government, through JADAF, is driving the industry to attain internationally recognised accreditation for health safety and environmental standards.

“We will modify and develop our processes, and once JADAF has moved to DMC, everything will be very strictly monitored,” emphasises Hamed Bin Lahej, general manager of JADAF Dubai.

“Environmental care will be a top priority, for certainly one of the cleanest operations in the region.”

The issue of corporate responsibility has been high on the agenda of Dubai Dry Docks too.

The yard voluntarily undertakes an independent audit from the British Safety Council twice every year, and the CEO Geoff Taylor is currently in London to receive their most prestigious award.

The BSC Sword of Honour is given to the top 40 companies around the world for achievements and contribution to health, safety and environment.

Central to the winning of the award is the fact that all blasting for new production is carried out indoor to reduce toxic emissions.

“We are honoured to receive this accolade, and it is reward for all the hard work we have put in to ensure our operations are as environmentally sound as possible,” says Taylor.

Others, such as Grandweld and ADSB, are not far behind in adopting this good practice.

“We are constructing a fully enclosed facility when we move to our new home at Dubai Maritime City,” explains Abaki.

“We’re working very closely with JADAF to improve and tighten up the blasting process.

The conclusion we have come to is that we will use sheds which are fully enclosed and equipped with air filters.”

Abu Dhabi Ship Building expresses similar sentiments, looking into ultra high pressure water blasting as an alternative.

“In our new composite facility all hazardous air pollutants (HAPs) such as solvents are filtered out by a state of the art ventilation system,” says Stewart.

The construction in the Arabian Gulf of the two Palm developments and The World project has brought a huge amount of dredger and project cargo ships into the arena of the regions ship repair facilities.

The increasing significance of the Jebel Ali port as a global hub guarantees a great deal of business in the future for the ship repair industry.

The infrastructure that was once lacking in the region to support the blue water vessels is now here.

As a result, the region is poaching business off more established ship repair locations such as Singapore.

Combine this success with the burgeoning market for smaller vessel refits and maintenance work and the ship repair industry looks set to continue to grow and deliver impressive returns.

“Dubai Dry Docks has seen a considerable rise in turnover in the repair and conversion sector of the business” Geoff Taylor
“It’s testament to the health of the industry that we’re exceeding targets without chasing contracts, it’s a fantastic position to be in.” William Stewart
“We are constructing a fully enclosed facility when we move to our new home in Dubai Maritime City” Jamal Abaki

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