"I've been going to Korea for nearly 30 years, when I went there first of all the infrastructure was poor, labour was cheap and quality was pretty ordinary. I think they peaked around the year 2000, I think it's actually in decline right now."
"Korean kids don't want to work in a fabrication yard, they want to build phones and televisions and high tech things, they've got a low population [growth]. When you look at HHI, Samsung and DSME they're all fishing in the same pond for the same welders, the same fitters, the same riggers. Wage expectations are spiralling, most of these big blue ribbon projects are under significant stress today in Korea.
"I don't fear Korea, I would fear China more if they could get their quality, schedule and safety issues sorted out, but again I've been going there for 10 or 12 years and they haven't, they're still stuck in those basic things."
For one of those basic things, UAE-based Lamprell has had its own recent problems. The Fred Olsen wind turbine carrier Brave Tern was due for delivery in Q2 2012, but slipped to October 2012 while its sister vessel, the Bold Tern, was delivered in February 2013 despite an initial delivery date in Q3 2012 . The delays resulted in significant additional costs and liquidated damages, totalling $46m of gross contract losses in 2012.
Lamprell's topside and jacket projects for Leighton slipped due to delays on deliverables to the yard, large parts of the project were expected to be completed in 2012, but these fell into 2013 and the final delivery date for the project will not now be until 2014, Moffat revealed.
The company's 2012 difficulties lead to the replacement of the entire senior management and an assessment of troubled projects by PricewaterhouseCoopers,which revealed significantly larger losses than previously recognised. The failure to keep the market informed of the company's deteriorating financial position lead to the Financial Services Authority handing down a $3.7m fine.
Moffat arrived at Lamprell in March as part of a senior management shake out, with the immediate task of recovering the company from a precarious financial situation. However, he is having to do this at a tough time for the shipyard industry as traditional shipbuilders target offshore and are offering highly preferential payment terms in an effort to gain a foothold in the marketplace.
Commenting on the trend of loading payments at the end of contracts for orders in Asian yards, Moffat said "20/80 [payment terms] are a shipbuilding offering, it has been standard for some time and a lot of rigs, that's how they're contracted. The Chinese are clearly a little bit more desperate, more recently they've actually been offering 1/99.
"You should all buy one by the way at that price, you've got an appreciating asset on paper," he quipped.
He went on to explain why he considers China to be a lesser threat, "when you look at the world market, more than half the rigs now are being built in China and when you drill into that and analyse, the bulk of them are being built by speculators. When you look at the histogram of production that has to come out of China I think this year, if I remember rightly, they have 13 rigs to produce by their original schedule and it grows next year and grows the year after. At this point in time they've not delivered one, so it looks like they could have a pretty busy last little period.
"I think there's an underlying story there, maybe the schedule's not quite as strong as everybody think's it's going to be there.
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