APAC Market for Maritime & Shipbuilding


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Frost Sullivan Analyst Briefing on APAC Market for Maritime & Shipbuilding

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APAC Market for Maritime & Shipbuilding

  1. 1. APAC Market for Maritime and Shipbuilding Neil Dave, Consulting Analyst Aerospace & Defense 6th December 2012© 2012 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property ofFrost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.
  2. 2. Focus Points• Maritime Industry Overview• Structure of Maritime Industry• Key Characteristics & Trends of the APAC Maritime Industry• Major Challenges & Drivers faced by the APAC Maritime Industry• Future Outlook and Key Takeaways from the APAC Maritime Industry 2
  3. 3. 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.• 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. 3
  4. 4. Maritime Industry – Overview (Contd.)• In 2011, the total volume of goods Development of International Seaborne Trade, 2011 shipped across the world reached close to about 9 billion tons of cargo 10000 80% in international seaborne trade. 9000 60% 8000 40%• The recent economic recession took 7000 Millions of Tons 20% a major toll on the global maritime 6000 industry adversely affecting the 5000 0% volume of cargo transported during 4000 -20% 2009. 3000 -40% 2000• However, seaborne trade 1000 -60% experienced a significant upswing in 0 -80% demand in 2010. 2006 2007 2008 2009 2010 2011• This was particularly observed for Oil Main Bulks dry bulk and container trade Other Dry Cargo New Order Growth Rate segments. 4
  5. 5. Maritime & Shipbuilding: Industry Structure, 2011 •The maritime industry comprises of a few large companies existing with the rest of industry participants made of a relatively large number of SMEs. • Maritime is a complex sector needing support from many players to run ships efficiently and safely. • This sector is highly influenced by economic and trade developments that take place around the world. • The diversified nature of the shipping industry does pose several challenges and particularly its cyclic pattern. 5
  6. 6. 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 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. 6
  7. 7. APAC Maritime Industry – Current Key Trends1. 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 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.. 7
  8. 8. APAC Maritime Industry – Major Challenges Major Challenges for APAC Maritime Industry Unsustainable Fragmented Overreliance onLaggingLabour Green Growth Export Oriented Regulatory Government Productivity Challenges Approach Framework Projects 8
  9. 9. APAC Maritime Industry – Key Drivers 9
  10. 10. 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 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. 10
  11. 11. 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.• 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. 11
  12. 12. Conclusion : Key Takeaways Shipbuilding is mainly affected by macro factors such as oil prices, 1 economic/political stability, world seaborne trade and market factors such as government subsidies, scrapping old vessels, vessels on order and pricing. To counter the influence of these external factors in light of APAC’s 2 competitive landscape, businesses and governments need to collaboratively formulate their responses. Close cooperation in shipbuilding and the marine equipment supply industry 3 will further bring about the much needed changes that are vital to beat the volatile market. There is a lack of protectionist policies by governments in the APAC region 4 required to safe-guard interests of shipbuilding companies which is expected to be a growth restraint unless corrected. Continuous evolution and innovation is required to be undertaken by maritime and 5 shipbuilding companies to prepare themselves to counter possible future impacts from changing macro-economic factors and natural calamities. 12
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  16. 16. 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 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. For any other enquiries, email us: asiapacific@frost.com 16