The rush for cheap ships may just get a whole lot funkier
By Ryan Skinner (email)
In talking to an engineer whose company supplies both the land-based process industry and the marine process industry, he held up what he saw as a basic truism: "Shipping's chased down costs by chasing cheaper markets; land plants long ago had to find different ways to drive down costs."
The ship that could be built cheaply by the lads in Ireland, then the guys in Finland, then Japan, Korea and now China, has few places to go to get cheaper. Sourcing cheap third-world labour's going to fade as a competitive advantage at some point. What then?
The shipping industry's very insular and productified approach to the main asset (the ship) has made this migration to cheap markets the path of choice. Combine that with lesser-developed governments' long-held view of shipbuilding as a lever for industrial development. All you need to take that show on the road are decent contracts - and you can probably see the march of shipbuilding to new markets as an expression of each country's willingness to enforce contracts.
Then the road came to an end. OK, there's always Sri Lanka, Mozambique and Laos. But when the path to efficient ship production stops leap-frogging to steadily cheaper markets, perhaps the shipping industry's view of its main asset will change too.
What does that mean? Instead of seeing the ship as a discreet legal entity, a product, to be delivered and maintained as cheaply as possible, the ship will be seen more as a process, and a service.
What I'm envisioning here is a transition: From a fragmented shipping industry of relatively disinterested, technically ambivalent investor of industrial groups, to a consolidated industry of large-scale shipping service providers who treat the ships as floating plants.
Such service providers would inherently professionalize the management of the ships. This would probably involve ownership of a network of yards around the world to service the ships economically. The huge forest of sub-suppliers would be pared down to a manageable handful of supplier partners forced to follow open network protocols (read: replaceable). Shipboard personnel would be treated more like plant managers than romantic (albeit poorly paid) heroes.
This is probably the kind of heady future some of the more high-end technical ship management outfits (hello V-Ships, Wilhelmsen and Wallem) already envision, or see themselves living. After all, they are, per definition, not terribly interested in the product. It's all the service.
Those who are able to add this kind of value to shipping will then inevitably inherit the assets themselves from their customers, who'll just want stuff shipped.
Interesting post. Just a short comment on your statement, "Combine that with lesser-developed governments' long-held view of shipbuilding as a lever for industrial development."
I don't know which government you're referring to. In the case of the Philippines, shipbuilding is seen by the State as a means for generating employment, not as a strategic industry for building up the capital goods sector and thus helping lay the groundwork for industrialisation as happened in South Korea (or in England, for that matter, in earlier centuries). You can read more about this in one of my blog posts: http://marine-cafe.com/mcblog/?p=1064
Foreign shipyards need cheap labour. The Government needs to create more jobs. It has become a kind of symbiotic relationship that's perfectly illustrated by the presence of Hanjin's mammoth shipyard at the Subic Bay Freeport north of Manila. Filipinos have not become a major shipbuilding nation any more than they have become a major shipping nation by supplying more than a quarter of a million seafarers to the world merchant fleet.
Capital, labour and technology. Ideally, the three should come together. In reality, we all now that they don't. It's still a compartmentalised world, even in the 21st century.
Posted by: Barista Uno | August 17, 2010 at 02:34 PM