RMK Marine Business Development and Projects Director Gürkan Türkeş has assessed the Turkish shipbuilding industry for our readers by taking into consideration the elements that guide the shipbuilding industry, the needs of the Turkish trade fleet, private sector shipyards and shipowners, global and internal market dynamics
Internal Market and dynamics / Turkish maritime trade fleet
The total capacity of the maritime fleet flying the Turkish flag is 8.3 million tons according to the United Nations Conference on Trade and Development (UNCTAD) and Clarksons research institute.
According to UNCTAD data, the Turkish maritime trade fleet, which was ranked 15th in the world maritime trade fleet in 2016, consisted of a total of 1540 ships. With a total capacity of 8.3 million tons, 562 of those ships fly the Turkish flag, while 978 ships with a total capacity of 19.6 million tons operate under foreign flags.
The Chamber of Shipping’s data for the same year is very close to the UNCTAD data.
Internal market and dynamics / Targets and realizations from Turkish shipbuilding industry perspective
If we need to create a projection on the ship demand of Turkish shipowners, when we look at the vessels that are over 20 years old and that can be constructed by our private sector shipyards, which constitute the Turkish shipbuilding industry building capacity:
According to the data from the beginning of 2016, a total of 210 ships in the load carrying capacity of 1,500 to 35,000 dwt are seen to be in the age range of 20 to 30 years. For these vessels, which will need to be renovated in the coming years, domestic market demand for domestic shipyards should be considered as a potential to be assessed.
Global market and dynamics / World trade
It can be seen from different sources that from 2009, when the 2008 global financial crisis and the effects continue, the upward trend of world trade is continued until 2015, and in parallel with this, the graph shows an increase in marine transportation volume.
Despite these optimistic assessments, it should also be known that maritime transport is more sensitive to the recession / recession periods in the economy than other sectors.
Because of its nature, maritime transport is a sector that serves the world economy. Therefore, the contraction in world trade and the contraction in the supply of credit can cause dramatic and sudden drops in the demand for marine transportation as the last example was experienced in 2008.
Without unforeseeable pause / retreat risks, projections for after the year 2015 also show an upward trend in general economic data and marine transport data.
Global market and dynamics / Global maritime trade fleet
A study was conducted to determine the need for renewal of the global marine commerce fleet and to determine the age and number of vessels of the type and size that can generate demand from the Turkish Shipbuilding Industry. According to the results of the study; we can find the number of tankers over the age of 20, with average load carrying capacity of 7,000 dwt, as 4,765 units in the calculation based on approximations. The need for renewal of these vessels, which will become increasingly evident over the next 5-10 years, may create a significant demand potential in the global market.
We can calculate the number of general cargo ships, over 20 years old that will need a similar renewal, with an average load carrying capacity of 2,600 dwt of 9,459 and the average load carrying capacity of 8,425 dwt container vessels as 210.
In addition to the world trade volume, the volume of maritime trade, and the number of vessels in ages that are in need of change / renewal, the following factors also need to be taken into account in the development of the shipbuilding industry:
n Energy and crude oil prices
n The current capacity of the maritime trade fleet and technological developments that will increase transport efficiency
n Economic, political, social crises, turbulences, tensions, conflicts
n War and conflict situations
n Large-scale natural disasters
n Environmental pollution protection, emission control rules and practices (air, sea, land)
n Technological developments that will increase the efficiency of the shipbuilding industry
n Support policies, incentives and incentives for the sector to implement.
Status of the balances
in the market and
It is a known fact that the shipyard industry, which is changing with many factors led by the age of the vessels in the fleet, has a “cyclic” character.
n Supply-demand balance
In response to the DEMAND, which originates from world trade’s need for raw materials and industrial products to be transported by sea, the world marine trade fleet transport capacity offers SUPPLY to the market.
From another perspective, in the global shipbuilding market, DEMAND emerges as the number of vessels and / or transport capacity that require the renewal of the world maritime merchant fleet, whereas SUPPLY is the shipbuilding capacity of the shipyards at this time
In the period we are in, the analysis of the maritime transport shows that the freight capacity of the ship, which constitutes the supply against the demand, is high and therefore the freight rates are at low levels. Due to this appearance in the big picture, the customer making the request to have its load carried is advantageous against the carrier.
Similarly, although the demand for ship construction is low, there is a surplus in the global shipbuilding capacity, which provides the supply. This puts the customer who wants to have a ship built into an advantageous position and puts severe pressure on the shipbuilding prices. As a result of the evaluation of the data, it can be predicted that this situation will reverse from 2022-2023.
Another factor on supply-demand balance is rule makers. The laws, rules and regulations defined and enforced by the rule makers can create concrete effects on the dynamics of the market where the buyer and the seller meet.
n In addition, states can provide significant support, incentives and facilities to their own country’s shipyards and shipbuilding industry companies for the reasons listed below.
n Providing the sale of industrial products of their own countries through shipbuilding projects,
n To create employment opportunities in the sector and supporting subsidiary industries and other main industries,
n Providing foreign exchange to the country’s economy
These practices, exemplified in the USA, Europe and finally South Korea and China, can change the Supply-Demand balance, which occurs in free competition conditions, in favor of the regulating state’s shipyards.
Finally, as an example of the South Korean government’s stated support policy,
South Korea’s finance minister said that the government planned to support orders of 250 or more vessels by 2020 to help local shipbuilders.
He also said that it plans to establish a state-backed ship financing company with an initial capital of 1 trillion won (871.73 million dolar) to help improve the financial health of Korean shipping companies.
Earlier last month, the International Monetary Fund completed a study of the troubled South Korean shipbuilding industry, estimating that the cost of restructuring the sector’s massive debts will approach 30 billion dolar.
Although the liberal economy and free market requirements reject interventionist policies and practices, the elements mentioned up to this point can have an effect on the market balances and thus the balances may change.
n Evaluations and Implications for Future Projections
When it comes to Turkish shipbuilding industry, the policies that can respond to the new construction demands that emerged as a result of changing rules should be determined and maintained at this time when the balances put pressure on the shipbuilding industry and shipbuilding prices. On the other hand, for those who have a vision to become a long-term solution partner for the market, being prepared with the package of suggestions below to the “Demand Wave” that can be predicted to grow in 2022-2023 should be seen as a necessity to adapt to the “cyclic” characteristic.
Considering the current competition conditions of the shipyards and the global market, reviewing the number of shipyards and the installed capacity,
In line with the internal market and global market projections, determining the right policies, defining the right targets, setting up realistic strategies, monitoring and updating the plans for the sector,
The determination and demand of the incentives and facilities that the internal market customer will need and which can be provided for the vessels that can be designed and constructed by the installed capacity of the Turkish shipbuilding industry,
Planning and planning of trained human resources and especially the need for intermediate personnel,
Increasing the design and production of raw materials, semi-finished products, equipments, devices and systems in the local supplier industry and other supporting industries to provide qualifications and certifications for the requirements of the shipbuilding industry and expanding its market share,
Development of vessel designs integrated with equipment configurations that will reduce the investment and operational costs of potential customers and presentation of the market.