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Live from Sea Asia

Chinese yards narrow gap in offshore vessel construction

Chinese yards narrow gap in offshore vessel construction
Singapore: Chinese shipyards building offshore support vessels (OSVs) are narrowing the gap to European and Southeast Asian shipbuilders as their quality has improved over the years, according to Venkatraman Sheshashayee, ceo of Jaya Holdings.

Jaya, a Singapore-based OSV builder and operator, has expressed concerns over the hike in prices of Chinese-built OSVs and the gradual improvements in designs and quality of the specialised ships.

“Chinese shipyards today are a threat. They are catching up fast and the price difference has also reduced sharply,” Sheshashayee told delegates at the Sea Asia 2013 Offshore Marine Forum, part of the Offshore Marine Day.

He explained that the newbuilding price differential between Chinese yards and European yards has fallen by 50 - 60% in today's market compared to 2010. Sheshashayee took the opportunity to reiterate Jaya's partnership with technology innovator IHC Merwede on designing a series of platform supply vessels (PSVs) built with European quality at Asian prices.

Part of the reason that the price differential has narrowed can be attributed to the rising labour cost in China, which has been displaying economic growth of 7-8% annually for the past few years. In Shanghai, for example, labour cost has risen 11% in 2012, doubling from the previous year, according to Geir Sviggum, managing partner at Wikborg Rein.

“Good Chinese yards are not cheap, unless you are talking about those greenfield yards,” Sheshashayee pointed out. Greenfield yards, typically privately-owned, are considered those that have yet to deliver a single vessel.

“We have to deal with this challenge from Chinese yards by moving up the value chain to areas where the Chinese have yet to catch up – this is the only option to deal with Chinese threat,” he said.

Chinese shipbuilders generally have an edge over building low-end, small anchor handling tug supply (AHTS) vessels and PSVs, while they have to compete to build medium-sized OSVs. But in the high-end, large OSV segment, their quality has yet reach international standards, according to Christian Bartz-Johannessen, managing director, RS Platou (Asia).

Industry observers have generally pointed to a five-year period for Chinese OSV builders to narrow their quality gap with the European counterparts. The lack of skilled engineers and the tendency for Chinese yards to delay the delivery of the vessels are also areas of concern for their prospective clients.