- The shipbuilding industry has experienced periods of high and low volume over the past 50 years, recently suffering due to the 2008 financial crisis. - Current challenges for creating value in shipbuilding include developing engineering capabilities, adapting to new technologies, and ensuring regulations are implemented in a way that enables new technologies. - The SAJ2015 forecast models future seaborne trade and ship replacement needs to estimate newbuilding requirements through 2035. It assumes moderate global GDP growth and forecasts growing demand for gas carriers and container ships. - The forecast estimates an average newbuilding requirement of 63.4 million gross tons between 2014-2035, with about half derived from replacing older ships and half from growth in seaborne trade.

1. Current Situation in the Shipbuilding Industry and
Long Term World Shipbuilding Forecast (SAJ2015)
Hiroshi Iwamoto
The Shipbuilders’ Association of Japan
OECD Council Working Party on Shipbuilding (WP6)
Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015

2. TheShipb
Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 2
1. Current Situation in the Shipbuilding Industry

3. TheShipb
Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 3
1-1. History of Shipbuilding Industry
0
20
40
60
80
100
120
65 70 75 80 85 90 95 00 05 10 14
Completions from 1965-2014 (million gt)
Value
Creation
is needed
suffering
situation again
Volume-
Oriented
Oil Crisis
(1973&1979)
Bankruptcy of
Lehman Brothers
(2008)
suffering situation

4. TheShipb
Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 4
1-2. Challenges for Value Creation Scenario (1)
1. Human Resources
 As already pointed out, the current shipbuilding activities have
weakened the development of engineering to increase values of
our products from various aspects. While the workforce at the
shipbuilding site can be outsources to a certain extent, the
engineering power needs to grow from inner potentials.
 When the value creation scenario comes into the highlight, further
wider range of engineering capability becomes necessary.
 Inner potentials can only be enhanced through a closer
understanding of the company objectives and the management
need to be more transparent towards the younger generations.

5. TheShipb
Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 5
2. Adaptability to New Marine Technology
As a result of more value creation thinking there seems to be,
although still limited, the ambitious attempts to apply new technology.
This has particularly been so in Japan on the LNG burning engine
related technologies, propulsion systems and energy saving devices,
emission controls, IT related systems.
Combining various technologies for environmental advantage as well
as energy saving is becoming a popular idea, which involves,
hardware and software.
While success stories are needed to create a more powerful
move in the industry, we also need to remember that against one
successful results, there could well be a few if not many efforts wasted
and more thoughts may be needed to improve efficiency.
1-2. Challenges for Value Creation Scenario (2)

6. TheShipb
Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 6
1-2. Challenges for Value Creation Scenario (3)
3. Regulatory Development
This is a great concern where more stringent regulations for safety
and environmental protection are introduced every now and then.
Adaptability to those regulations will be a key issue for all shipyards and
it will very much depend on how the regulations are
implementation friendly.
Some regulations have been set in a rush to achieve results, and
there might be political importance in doing so, but if new technology is
involved in the rule making process, this needs to be done carefully in
order to prevent any undesired or unintended consequences
arising from lack of careful impact analysis. Once the rules are in
force, it will not be easy to take corrective actions.
Shipbuilders will have a large role to play in providing impact analysis.

7. TheShipb
Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 7
2. Long Term World Shipbuilding Forecast (SAJ2015)

8. TheShipb
Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 8
2-1. Introduction of SAJ Forecast
 has periodically been done since 1960’s, to support long-term
business strategy making of SAJ’s member companies.
 is based on both forecasts of future seaborne trade development
and future replacement.
➢ So, speculation orders, and short-term volatility of shipping
freight and shipbuilding price are NOT taken into account.
SAJ Forecast…

9. TheShipb
Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 9
Newbuilding Requirement
by Ship Type Derived from…
Seaborne Trade
Based on various factors such as…
• GDP Growth
• Energy Consumption
• Population Increase
• Crude Steel Production/Consumption
Newbuilding Requirement
by Ship Type Derived from…
Replacement
Newbuilding Requirement
2-2. Rough Sketch of SAJ Forecast Methodology
SAJ’s Demolition Model
Ship Type (example) Age
Oil Tankers (200k+)
Bulk Carriers (100k+)
Containerships
25
24
28
50% of vessels assumed to be scrapped at
above age

10. TheShipb
Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 10
2-3. Assumption of GDP Growth in SAJ2015
Based on economic outlooks of various organisations such as IMF, IEA and
EIA
GDP Growth Forecast (%)
2013-35 2013-20 2020-25 2025-30 2030-35
OECD 2.0 2.2 2.0 1.9 1.9
Non-OECD 5.0 5.4 5.3 4.8 4.2
World 3.7 3.9 3.8 3.6 3.3

11. TheShipb
Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 11
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035
(mil. ton)
Crude & Product 5 Major Bulk Minor bulk Other Dry Gas (LNG, LPG etc.) SAJ2014
9,963
11,617
14,671
16,296
13,084
Forecast
(million ton)
Growth Rate between 2014-2035 2035 Share
Total Cargo 2.2%pa 16,296 100%
LPG/LNG 3.0%pa 697 4%
Container Cargo 3.6%pa 5,853 36%
Minor Bulk 2.4%pa 1,954 12%
Major Bulk 1.2%pa 4,013 25%
Oil 1.3%pa 3,780 23%
2-4. Seaborne Trade Forecast in SAJ2015

12. TheShipb
Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 12
2-5. Replacement demand in SAJ2015
(age)
30-40*
Assumption of Average Scrap Age by Ship Type in SAJ2015
*depends on Shipsize or Shiptype
50% of vessels assumed to be scrapped at above ages and create replacement
demand.

13. TheShipb
Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015
0
20
40
60
80
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035
0
20
40
60
80
100
120
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035
Tankers Bulk Carriers Containerships Other Dry Cargo Ships
Gas Carriers (LNGCs & LPGCs) Others SAJ2015 SAJ2014
13
Mill. GT
41.8
52.4
69.9
96.2
29.3
34.0
43.5
57.4
Mill. CGT
Av.Newbuilding Requirement 2014-2035 Share
Total Newbuidings 63.4 Mill.GT 100%
Others(Offshore etc) 6.9 Mill.GT 11%
Gas Carrier 3.9 Mill.GT 6%
ODC Ship 5.2 Mill.GT 8%
Container Ship 17.1 Mill.GT 27%
Bulk Carrier 18.2 Mill.GT 29%
Tanker 12.1 Mill.GT 19%
Av.Newbuilding Requirement 2014-2035 Share
Total Newbuidings 40.2 Mill.CGT 100%
Others(Offshore etc) 10.8 Mill.CGT 27%
Gas Carrier 3.1 Mill.CGT 8%
ODC Ship 4.2 Mill.CGT 10%
Container Ship 9.0 Mill.CGT 22%
Bulk Carrier 8.4 Mill.CGT 21%
Tanker 4.9 Mill.CGT 12%
2-6. SAJ2015 Newbuilding Requirement Forecast (1)

14. TheShipb
Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 14
2-6. SAJ2015 Newbuilding Requirement Forecast (2)
Mill. GT
2014-20 2020-25 2025-30 2030-35 2014-35
Requirement
from Replacement
19.8
(47%)
21.8
(42%)
33.3
(48%)
57.3
(60%)
32.1
(51%)
Requirement
from Seaborne Trade
22.0
(53%)
30.5
(58%)
36.5
(52%)
38.9
(40%)
31.3
(49%)
Total Newbuilding
Requirement
41.8 52.4 69.9 96.2 63.4

15. TheShipb
Workshop on Supply and Demand in the Shipbuilding Industry, 9 November 2015 15
Thank you for your attention