Desulfurization tower retrofitting: changing the "hands-on" of the ship repair market
Following the bulb nose conversion business in 2014, the installation of ship exhaust gas desulfurization equipment (desulfurization tower) has become a new focus in the ship repair market. The desulfurization tower installation business that broke out in the first half of 2019 broke the original supply and demand pattern of the ship repair market, and brought a more rare positive market.
Industry insiders have analyzed that the market boom that has arrived has undoubtedly formed favorable external conditions for the stable and healthy development of the ship repair industry. However, ship repair companies should not take the risks and challenges of the desulfurization tower retrofit business lightly, and should actively and steadily promote this hot business.
Strong retrofitting needs
From January 1, 2020, the International Maritime Organization (IMO) MARPOL ANNEX Ⅵ Low Sulfur Oil Convention has entered into force. At that time, all merchant ships sailing in oceans shall not use fuel oil with a sulfur content of more than 0.5%. This convention has prompted shipowners to begin trying to install desulfurization towers on ships in the past year or two, which will have a strong driving force for ship repair demand in the next few years. Statistics from relevant international authorities show that by the end of 2020, about 2,000 operating ships around the world will complete the installation of desulfurization towers.
Backbone ship repair companies enjoyed this "bonus" earlier. As early as 2017, some ship repairing companies aimed at the desulfurization tower installation business, and increased the research and development of technology and processes to seize this market early. According to the statistics of the Chinese ship repair company "SPEC", in 2018, these companies undertook a total of 896 sets of desulfurization tower installation business, an increase of nearly 90% over 2017, most of which are 2019 projects, a small part The project will continue until June 2020. According to the calculation of the Ship Repair Branch of the China Shipbuilding Industry Association at that time, the annual installation capacity of SPCC member units was only about 700 sets.
In 2018, the earlier ship repair companies entering this field have completed the installation of multiple sets of desulfurization towers and accumulated some experience. In order to cope with the peak of the retrofit business this year, these companies are actively preparing for early production and technology, maintaining close communication with ship owners, equipment manufacturers and other parties to strengthen project management and improve efficiency, and find ways to fill the labor gap.
In the first quarter of this year, some ship repair companies just ushered in the first ship to be installed in the desulfurization tower. Among them, there are many ultra-large oil tankers (VLCC) and ultra-large ore carriers (VLOC) with conversion costs of hundreds of dollars. Attempting to implement 1 or 2 retrofit projects, and then analyzing and summarizing them, is the intention of relevant companies to expand this business. Due to the tight time limit, some companies have also set up desulfurization tower retrofit project groups to focus on how to shorten the cycle and improve efficiency, and hope to study in experienced companies.
At present, the desulfurization tower installation project mainly presents two major characteristics. One is mostly open desulfurization towers. According to reports, the installation of open desulfurization towers has the characteristics of "short, flat and fast", and the difficulty of construction and management is relatively small. The installation process of the closed desulfurization tower is relatively complicated, and the construction period of the hybrid desulfurization tower is usually more than 2 months, which easily puts the shipyard into a "passive" situation, which is not conducive to optimizing the product structure and serving quality customers. Second, most enterprises use processing contract. This will help ship repair companies to accumulate experience, improve efficiency, and reduce many obstacles in business and technical communication.
The future demand for desulfurization tower installation is relatively optimistic. The shipping research institute predicts that by 2020, the average price difference between compliant low-sulfur oils and high-sulfur oils will be about $ 240 per ton. Industry insiders have analyzed that the price difference between high-sulfur oil and low-sulfur oil due to the tight supply of compliant low-sulfur oil will stimulate more shipowners to install desulfurization towers and should be able to support the continued prosperity of the ship repair market in the future. It is worth noting that the demand for desulfurization tower retrofitting, conventional repairs, and ballast water treatment system modification is superimposed. In the future, ship repair docks will be in short supply, and the price of all types of ship repairs will increase.
Fully resolve various pressures
Ship-repairing enterprises have ushered in an excellent opportunity to improve efficiency. However, the market peak driven by the desulfurization tower installation is not completely risk-free. Many ship repair companies are no longer taking orders blindly, or hesitating between signing and not signing. Even the company holding the largest number of orders, this business is mainly targeted at core customers and large shipowners, and the number of customers involved is not large. Organizations in the ship repair industry suggest that early preparations and careful arrangements should be made in terms of technology, craftsmanship, and management to make every effort to reduce losses and performance risks.
Having accurate estimates of installation capabilities is a prerequisite for expanding this business. Desulfurization tower installation projects need to occupy docks and shipyards, especially for large vessels. A relevant person in charge of a major ship repair company in Zhoushan said that three ships have been struggling to modify at the same time. If there are problems in drawing provision and equipment arrival, construction efficiency will be lower. At the same time, the desulfurization tower modification has relatively high production design requirements and a large demand for related professional labor. Whether to adopt the EPC model is also a question that must be carefully considered.
"The biggest pressure on the desulfurization tower installation business is the uncontrollable labor and procurement costs." A person in charge of a backbone ship repair company said that the labor price of pipe processing in the local and surrounding areas has risen sharply compared to last year, which has greatly squeezed The profit margin of handheld retrofit orders.
After the ship leaves the factory, the quality assurance of the desulfurization tower should also be paid attention to. For example, the GRE pipe in the desulfurization tower is very different from the seamless steel pipe commonly used in conventional repair projects, and the maintenance work is very professional. Once the GRE tube has quality problems during the warranty period, the global maintenance service of international sailing ships must keep up. People in the industry suggest that ship repair companies should strengthen the exchange of experience in quality assurance work to avoid legal disputes.
It is worth noting that there is a certain conflict between the installation of the desulfurization tower and the conventional repair business. According to the analysis of the ship repair industry, the focus will be on the former, which is likely to lose some core customers. Therefore, to protect the interests of traditional and core customers, on the one hand, it is necessary to balance the proportion of the two types of orders so that old customers no longer have docks when making inquiries; on the other hand, they must coordinate their efforts to allocate production resources to ensure two types of business Go hand in hand.
Through the installation of desulfurization towers, China's ship repair industry has made outstanding contributions to the global reduction of maritime transport. Analysis of industry organizations: The East Asian economic circle, which is dominated by China, Japan, and South Korea, is the world's largest shipping hub, and a large number of merchant ships travel to the Far East. At the same time, China's ship repair industry has the obvious advantages of low cost, high efficiency, and complete support. There is no doubt that China has become the preferred region for the installation of desulfurization towers for shipowners worldwide.
Among them, China's mainstream ship repair companies have benchmarking functions in terms of conversion quality, quotation, and efficiency, which will have a certain impact on the international ship fuel supply market after 2020 and even countries' policies on emission zones. Therefore, it is necessary for backbone ship repair companies to maintain regular exchanges and reasonably promote the sharing of service capacity information to promote the orderly development of desulfurization tower installation business and better meet the needs of the shipping industry.
Early response to market fluctuations
For the further "post-desulfurization tower era", ship repair companies should also plan ahead. Industry insiders pointed out that the strong demand for desulfurization tower installations will eventually fade, whether there will be some variables in the subsequent desulfurization tower installations, and whether there will be significant fluctuations in ship repair prices before and after the market peak. New business growth points are issues that ship repair companies need to deal with in advance. Only with early planning and early action can the ship repair industry go further on the development track of overall stability, stability and quality improvement.
At present, many ship repair companies have sufficient hand-held orders for desulfurization tower installation before 2020. At least during this period, the market situation is relatively optimistic. It is difficult to predict how the desulfurization tower retrofit business market will go after this. Compliance with low sulphur oil prices and policies on emission control zones will have a significant impact on this.
Just on October 25, the Maritime Bureau of the Ministry of Transport issued the “2020 Global Fuel Oil Sulfur Limitation Order Implementation Plan”. The plan clearly states that from January 1, 2020, international sailing vessels are not allowed to discharge the open-type exhaust gas cleaning system washing water in China's ships' atmospheric pollutant emission control zones. Recently, the Panama Canal also turned on a "red light" for ships with open desulfurization towers passing the shipping river. Industry insiders said that when the "post-desulfurization tower era" arrives, the development and changes of desulfurization tower products and installation technologies need to be analyzed in advance.
Another issue that must be faced is the price of ship repairs. Compared with the beginning of the year, the prices of various ship repair companies have increased to varying degrees, and this momentum continues. When the desulfurization tower installation business is nearing its end and it is quiet, the price of ship repair will lose this powerful support. However, the comprehensive cost of ship repair companies is difficult to fall back, especially the increase in labor costs in this round will directly affect the profitability of ship repair companies. In this regard, the backbone ship repair companies have begun to strengthen the pre-judgment and planning work to avoid greater crisis and pressure.
In addition, to cope with the "post-desulfurization tower era", it is also necessary to adapt to the market and lay out early to cultivate new business growth points. Industry insiders analyze that laying a solid foundation early in terms of hardware, technology, management and marketing will surely gain sufficient advantages and take a new path in expanding business structure. At present, there are not many dual-fuel ships in the world, and the conversion market is full of opportunities and challenges. As far as large container ships are concerned, there are at least 50 ships above 15,000 TEU in the world, and the trend of dual fuel conversion will become increasingly clear. In this field, some ship repair companies have seized the opportunity.
The smooth operation of the ship repair market also needs to gather the strength of the entire industry. At the 70th meeting of the SPCC held earlier, participating members discussed how to deal with the "post-desulfurization tower era". Driven by industry organizations, ship repair companies will establish exchange mechanisms to conduct in-depth research on this subject to ensure a smooth transition in the ship repair market.