A case for shipbuilding and repair yards

Written By Bolaji Akinola

The maritime sector provides very interesting and exciting prospects for economic growth.

A strong and viable maritime industry and Nigeria-flag fleet is critical to our economic and national security interests. Our longshoremen and mariners serve a unique role acting as an economic driver in transporting domestic and international cargo. It is therefore critical that our national policies embrace maritime transportation as a vital component of our nation’s transportation system, and make significant investments in the Nigerian maritime industry and port infrastructure.

A vital component of the maritime sector is the shipbuilding and repair industry, which has largely suffered neglect since Nigeria’s independence.

Evidence from Ancient Egypt shows that the early Egyptians knew how to assemble planks of wood into a ship hull as early as 3000 BC.

In the early modern era, shipyards became large industrial complexes with shipbuilding financed by consortia of investors.

The industrial revolution made possible the use of new materials and designs that radically altered shipbuilding. Iron was gradually adopted in ship construction, initially in discrete areas in a wooden hull needing greater strength, (e.g. as deck knees, hanging knees, knee riders and the like.

After the Second World War, shipbuilding (which encompasses the shipyards, the marine equipment manufacturers, and many related service and knowledge providers) grew as an important and strategic industry in a number of countries around the world. This importance stems from the large number of skilled workers required directly by the shipyard, along with supporting industries such as steel mills, railroads and engine manufacturers; and a nation’s need to manufacture and repair its own navy and vessels that support its primary industries.

Shipbuilding has therefore remained an attractive industry for developing nations. Japan used shipbuilding in the 1950s and 1960s to rebuild its industrial structure; South Korea started to make shipbuilding a strategic industry in the 1970s, and China is now in the process of repeating these models with large state-supported investments in this industry.

Currently, South Korea is the world’s largest shipbuilding country with a global market share of 41%. South Korea leads in the production of large vessels such as cruise liners, super tankers, LNG carriers, drill ships, and large container ships. In the 3rd quarter of 2011, South Korea won all 18 orders for LNG carriers, 3 out of 5 drill ships and 5 out of 7 large container ships. South Korea’s shipyards are highly efficient, with the world’s largest shipyard in Ulsan operated by Hyundai Heavy Industries slipping a newly built, $80 million vessel into the water every four working days.

South Korea’s “big three” shipbuilders, Hyundai Heavy Industries, Samsung Heavy Industries, and Daewoo Shipbuilding & Marine Engineering, dominate global shipbuilding, with STX Shipbuilding, Hyundai Samho Heavy Industries, Hanjin Heavy Industries, and Sungdong Shipbuilding & Marine Engineering also ranking among the top ten shipbuilders in the world.

Japan had been the dominant ship building country from the 1960s through to the end of 1990s but gradually lost its competitive advantage to the emerging industry in South Korea which had the advantages of much cheaper wages, strong government backing and a cheaper currency.

South Korean production overtook Japan’s in 2003 and Japanese market share has since fallen sharply.

China is an emerging low-cost, high-volume shipbuilder that briefly overtook South Korea during the 2008-2010 global financial crisis as they won new orders on medium and small-sized container ships.

The strength of shipbuilding and repair indusrty can be seen in a recent report released by the U.S. Maritime Administration (MARAD).

The U.S. shipbuilding and repair industry supported more than 110,000 jobs and contributed $37.3 billion in overall annual gross domestic product to the U.S. economy in the year 2013, according to MARAD.

The new figures show that the U.S. domestic shipbuilding industry is growing. MARAD’s last study, showing figures from 2011, showed that U.S. shipyards supported 107,000 jobs and directly and indirectly contributed $36 billion in gross domestic product.

In 2013, there were 124 active shipbuilders in the United States, spread across 26 states. In addition, there were more than 200 shipyards engaged in ship repairs or capable of building ships but not actively engaged in shipbuilding, according to MARAD. The majority of shipyards are located in the coastal states, but there also are active shipyards on major inland waterways such as the Great Lakes, the Mississippi River, and the Ohio River, the MARAD data showed.

According to MARAD, in 2013, the U.S. private shipbuilding and repairing industry directly provided 110,390 jobs, $9.2 billion in labor income, and $10.7 billion in GDP. Including direct, indirect, and induced impacts, on a nationwide basis, total economic activity associated with the industry reached 399,420 jobs, $25.1 billion of labor income, and $37.3 billion in GDP in 2013, the MARD data showed.

The states with the highest levels of overall direct, indirect, and induced employment associated with the industry are Virginia, California, Mississippi, Louisiana, and Texas, MARAD said.

The date also showed that the federal government, including the U.S. Navy, U.S. Army, and U.S. Coast Guard, is an important source of demand for U.S. shipbuilders. While just one percent of the vessels delivered in 2014 (11 of 1,067) were delivered to U.S. government agencies, 10 of the 12 large deep-draft vessels delivered were delivered to the U.S. government: five to the U.S. Navy, four to the U.S. Coast Guard, and one to the National Science Foundation, according to MARAD.

All ships need maintenance and repairs. A lot of maintenance is carried out while at sea or in port by ship’s crew. However a large number of repair and maintenance works can only be carried out while the ship is out of commercial operation, in a ship repair yard.

The MARAD study showcases the important role the U.S. shipbuilding and repair industry plays in both commercial and military sectors, while also highlighting the critical support the shipyard industrial base provides to the nation’s economic and national security.

We must therefore pay quality attention to this industry to create much needed jobs and retain value within the Nigerian economy.

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