After a stunning few years installing scrubbers and ballast water treatment systems, Chinese ship repair yards, who dominate the sector, are being forced to slash their prices as work dries up.
Brokers Intermodal report Chinese repair yards are currently facing a “relatively slack program” and have resorted to lowering prices to keep their facilities ticking over.
China is very dominant when it comes to the ship repair sector. Clarksons data shows Chinese repair yards accounted for 49% of global repair events in 2020, ahead of yards in Turkey (9%) and the UAE (4%) and up from 45% in 2019.
Part of the problem facing the local repair scene is Beijing’s very strict rules in allowing foreigners into the country during the pandemic so most of the repairs must be carried out without office representatives. This restriction is keeping away all the owners with complicated repairs, Intermodal pointed out in its most recent weekly report.
In addition, there’s far few scrubber installations going on today compared to the previous three years.
Certain types of work have been more limited in 2020 due to the pandemic, notably cruise refurbishments (down 60% year-on-year according to Clarksons) and some offshore-related work.
“Chinese shipyards have become more competitive, trying to attract as many projects as possible, boosting the competition further. For owners this a good chance of getting good service at a low cost,” Intermodal pointed out.
Rival brokerage Clarksons has been more optimistic about the ship repair prospects, noting in a recent report: “Looking forward, the ‘Green Transition’ could drive a huge volume of new work across engine retrofits, renewables and ESTs, providing plenty of room for optimism.”
A host of recent reports suggest significant swathes of the current merchant fleet will need to head to repair yards in the coming couple of years in order to meet new EEXI environmental rules, likely to come into place by 2023.