risk assessment for shipyards performing...

Project co-funded by the European Commission within the Seventh Framework Programme (2007- 2013)

Project No.: CP-266268

Project Acronym: ECO-REFITEC

Project Title: Eco innovative refitting technologies and processes for shipbuilding industry

promoted by European Repair Shipyards

Instrument: Collaborative Project

Thematic Priority: Sustainable Surface Transport

Risk Assessment for Shipyards performing retrofits:

Analysis of the risk associated with the greening of

existing fleet in EU shipyards.

D.1.3

Document Id.: EcoREFITEC-D-1.3-2011-10-31-SOERMAR-Risk Assessment-rev-1

Due date of Deliverable: 2011-05-30

Actual Submission Date: 2011-10-31

dissemination level

PU Public

PP Restricted to Programme Participants (including Commission Services)

RE Restricted to a group specified by the Consortium (including Commission Services)

CDP As for „Confidential‟, but only for the duration of the Project. After final Project Approval by

the EC, status for reports classified „CDP‟ are automatically down-graded to „Public‟

CO Confidential, only for members of the consortium (including Commission Services)

Francisco del Castillo Fundación Centro Tecnologico SOERMAR

-document author- -organization name of lead contractor for this deliverable-

Rocco Gargiulo - CONSAR Final

-document approved by- -revision type-

2011-10-28 PU1

-date of last update- -distribution level-


Analysis of the risk associated with the greening of existing

fleet in EU shipyards.

D.1.3

Document Id.: EcoREFITEC-D-1.3-2011-10-31-SOERMAR-Risk Assessment-rev-1 of 93

Disclaimer

The information contained in this report is subject to change without notice and should not be construed as a commitment by

any members of the Eco-REFITEC Consortium or the authors. In the event of any software or algorithms being described in this

report, the Eco-REFITEC Consortium assumes no responsibility for the use or inability to use any of its software or algorithms.

The information is provided without any warranty of any kind and the Eco-REFITEC Consortium expressly disclaims all

implied warranties, including but not limited to the implied warranties of merchantability and fitness for a particular use.

The Eco-REFITEC Consortium

This document can not be copied, reproduced or distributed, entirely or partly, without written permission from the Eco-

REFITEC Consortium. Acknowledgement of the authors of the document shall be clearly referenced.

All rights reserved.

Document History

Document ID. Date Description

EcoREFITEC-D-1.3-2011-10-31-SOERMAR-Risk

Assessment-rev-0

2011-10-20 Draft Version distributed for internal

review

EcoREFITEC-D-1.3-2011-10-31-SOERMAR-Risk

Assessment-rev-1

2011-10-28 Final Version implementing the internal

reviewers comments.




D.1.3


Document Control Sheet

Title: Risk Assessment for Shipyards performing retrofits: Analysis of the risk associated with the

greening of existing fleet in EU shipyards.

Executive Summary:

The repair and conversion industry is a specific segment of the Shipbuilding Industry. While the global

fleet has expanded, and technology has become more complex, this segment has also gained in

importance. At present, Europe is well positioned in this segment but there is a very competitive

environment, where new challenges and emerging risk must be faced by the European ship repair to keep

or improve their competitiveness.

The identification of current and potential risks affecting the European Eco Retrofitting programs in all

shipyards‟ areas of activity is the main objective of this study. The scope has been to investigate the risk

that could be associated to the operation of Repair Shipyards in Europe when developing ship retrofitting,

in particular in the Eco-REFITEC participants countries. It must provide a representative selection of

hazards giving a background for further work.

As, to better assess the shipyard risk a better understanding of the environment is required, THE VALUE

ADDED TO ECO_REFITEC BY THIS DELIVERABLE IS TO DELIVER KNOWLEDGE AND INSIGHTS INTO THE

KEY CHALLENGES AND RISK TO BE FACED BY THE EUROPEAN SHIP REPAIR INDUSTRY WHEN DEVELOP

NEW SKILLS TO CARRIED OUT ECO-RETROFIT.

On the basis of conducted analysis, IN THIS DELIVERABLE IT IS ALSO PROVIDED, AN OVERVIEW OF THE

INTERACTIONS BETWEEN DIFFERENT ENVIRONMENTAL ASPECTS THAT AFFECT THE COMPETITIVITY OF

THE EUROPEAN REPAIR SHIPYARDS. An Macro and Micro environment analysis of the ship repair

industry has been carried out resulting on the following:

The rivalry among firms in the ship-repair industry is quite intense and is mostly based on price

competition. Location is important and most repair centers are located along major shipping

routes.

It will be difficult the competition on a world level playing field.

Concerns regarding environmental impact of waterborne activities increased significantly over

the past few years. The challenge of climate change is an emerging top priority issue which have

some serious implications for the shipping sector.

There are some promising potentials for the yards by the increasing world fleet, the high share of

old vessels and the refitting demand due to tightened rules for ballast water management, slow

steaming operations, emission reduction and exhaust gas cleaning. The prospect of world ship

repair market is optimistic.

The retrofit projects to be carried out in future for satisfying regulatory compliance according to

the new IMO and EU environmental regulations, may call for some changes in the shipyard

production organisation and strategy to achieve the targets in an economical, safe and

environmentally friendly manner.

Most ship-repair companies are making use of technology to attain higher production levels and

greater efficiency.

Ship-owners and shipyards are still confronting with financing and cash flow difficulties. The

conversion of shipbuilding facilities into repair facilities is also a threat by the sector.




D.1.3


As it was indicated above, this deliverable provides the identification and assessment of risks affecting

the Eco Retrofitting programs in European repair shipyards and a macro and micro environmental

analysis of the ship repair industry. But, AN ADDITIONAL ADDED VALUE TO ECO_REFITEC BY THIS

DELIVERABLE IS THE DEVELOPMENT OF AN ECO-REFITEC ENVIRONMENTAL MODEL FOR THE

RETROFITTING SECTOR AS WELL. The proposed model has been used for the Analysis of operation of

Ship repair shipyard performing retrofitting works in Europe.

Based on the internal strength/weaknesses and external opportunities/Threats position of European Ship-

repair Industry on retrofitting, the sector should follow a “Hold and Maintain strategy”. These strategies

are suggested within the sector: Market Penetration, Product development, Backward Integration or/and

Horizontal Integration.

AS CONCLUSION, THIS DELIVERABLE RELATES TO THE FINAL TARGETED RESULTS OF ECO-REFITEC

SUPPORTING THE EUROPEAN REPAIR SHIPYARD SECTOR IN THE FIELD OF INDUSTRIAL COMPETITION.

Risks (and threats and Weaknesses) has been presented for their further evaluation and consideration by

the European repair shipyards.

As such, the analysis undertaken within the study should contribute to the formulation of suggestions and

recommendations for actions that can contribute to improve the European ship repair industry

competitiveness.

Work carried out by Approved by

Francisco del Castillo, (SOERMAR)

Dig Vijay Singh, (SU)

With the collaboration of

Marco Antonio Estrela, (ISQ)

Marta Walk, (CTO)

Rima Mickiewicz, (KU)

Nedelcho Vichev, (VSTU)

Chris Mullen (SSA)

Valentin Marian Ivanof (SCN)

Pedro Oslé (ASTANDER)

Thomas Koch (AES)

Laurentiu Oancea (CAES)

Valentin Marian Ivanof (SCN) - name of first reviewer -

- signature of internal reviewer and date of acceptance

Rocco Gargiulo - CONSAR - name of second reviewer -

- signature of internal reviewer and date of acceptance




D.1.3


Contents

1 Introduction .......................................................................................................................................... 6 1.1 Concretization of Task Description .............................................................................................. 7 1.2 Related ECO-REFITEC Tasks ..................................................................................................... 7

2 Overview of the development of European Ship repair sector ............................................................. 8 2.1 The global market place ............................................................................................................... 8 2.2 Characteristics of the Repair Market ...........................................................................................13 2.3 The structure of ship-repair by main regions ..............................................................................15

3 Competitive Analysis of the Repair sector in Europe .........................................................................23 3.1 Macro environmental Analysis on Ship Repairing Industry .......................................................23 3.2 Micro environmental Analysis of the European Ship Repairing Industry ..................................27

4 Current Organisational Structure and Strategy of the European Ship repair Shipyards ......................31 4.1 Background .................................................................................................................................31 4.2 Major Inferences in light of answer to Eco-REFITEC questionnaire .........................................33 4.3 Major Challenges in the ship retrofitting .....................................................................................34

5 Analysis on Operation of Ship Repair Industry: Eco-REFITEC Environmental Model .....................36 5.1 A reference Ship Building and Ship-repair model ......................................................................36 5.2 Eco-REFITEC Environmental Model .........................................................................................38

6 Factor Evaluations from the European Ship repair Shipyards on retrofitting work. ...........................40 6.1 Internal Factor Evaluation: Evaluation of Strengths and Weakness. .........................................41 6.2 External Factor Evaluation: Evaluation of Opportunities and Threats. ......................................43 6.3 SWOT Matrix ..............................................................................................................................45 6.4 Internal – External (IE Matrix) ...................................................................................................46 6.5 Regional Analysis ........................................................................................................................47

7 Risk Assessment for Shipyards performing retrofits ...........................................................................52 7.1 Introduction .................................................................................................................................52 7.2 Relevant Regulations ...................................................................................................................52 7.3 Risk Criteria ................................................................................................................................54 7.4 Risk Identification .......................................................................................................................55 7.5 Results .........................................................................................................................................56

8 Main Conclusions ................................................................................................................................58

Annexes .......................................................................................................................................................60 A.1 Annex 1: List of References ........................................................................................................60 A.2 Annex 2: Abbreviations and Definitions .....................................................................................61 A.3 Annex 3: Grand Strategies definitions ........................................................................................62 A.4 Annex 4- Shipyard Questionnaire – Part A .................................................................................65 A.5 Annex 5- Shipyard SWOT survey and Shipyard Questionnaire – Part B ..................................73 A.6 Annex 6- Owner survey ..............................................................................................................87




D.1.3


1 Introduction

Alterations in IMO and EU regulations can bring changes in repair shipyards production organization.

New requirements should be taken into consideration from the stage in design shipyard office, throughout

supply chain, ending in developing new skills.

This report is built on the framework provided by the Eco_REFITEC project, so as to deliver knowledge

and insights into the key challenges and risk to be faced by the European ship repair industry when

develop new skills to carried out Eco-retrofit. As such, the analysis undertaken within the study should

contribute to the formulation of suggestions and recommendations for actions that can contribute to

improve the European ship repair industry competitiveness.

This report focuses on a partial analysis of the European ship repair industry. It is therefore not intended

in defining absolute challenges for the European Repair industry in light of the current scenario.

It should be noted that the study is carried out by the Eco_REFITEC Consortium. This report represents

the views of the task participants, which do not necessarily coincide with others.




D.1.3


1.1 Concretization of Task Description

Eco-REFITEC has addressed throughout this task, management and business “risks” for the ship repair

shipyards performing retrofitting work to fleet greening.

1.1.1 Deliverable structure

This deliverable is structured in seven section plus annexes.

The first section contains a description of the ship repair sector, illustrating key characteristics

and main trends. The background covers an overview of the following areas: The global Market

place, the world fleet, the European Potential Market and the structure of the Ship Repair

Industry. (Section 2).

The second section analyses the environmental competitive aspects of the Repair sector in

Europe: Macro and Micro Analysis (Section 3). This section analyses the current competitive

position of the sector in Europe vis á vis its competitors.

The third section presents the results of the Shipyard Questionnaire Part A regarding the

available infrastructure, yard capabilities and expertise, project management strategies, etc.

needed to assess the opportunities available for improving market competitiveness and statutory

regulatory compliance to the satisfaction of the legislative bodies.

The fourth section presents specific Environmental shipyards models to analyse the Operation of

Ship Repair Industry and develop one to be used for retrofitting. (Section 5)

The fifth section analyses the Operation of the Ship Repair Industry in Europe through the

evaluation of internal and external factors which conclude in the identification of the high level

strengths and weaknesses of the ship repair in Europe. (Section 6)

The sixth section summarises the main risks identified in the study carried out associated with

the greening of existing fleet in EU shipyards. (Section 7)

The final part presents the Final conclusions of the study developed, and gives some

recommendations for further actions that can contribute to improve the European ship-repair

industry competitiveness. (Section 8)

1.2 Related ECO-REFITEC Tasks

Task 1.1 – Retrofitting work forecast according to IMO environmental requirements.

Task 1.2 – European directives applicable requirements for Ship repair processes.

Task 1.4 – Technical, Operational and environmental objectives for cases studies.




D.1.3


2 Overview of the development of European Ship repair sector

This chapter gives an overview of world shipbuilding, illustrating key characteristics. The chapter

concludes with brief profiles of main shipbuilding regions.

2.1 The global market place

Ship maintenance, repair and conversion represent a special business segment, in many aspects different

from the ship new building industry.

According to CESA2, ship conversion is closer to new building yards activities in time scales for each

job; however, a refit requires a totally different approach in having the flexibility to constantly

accommodate changes in the work plan, according to the satisfaction of the client. Besides, ship

maintenance and repair is typically a short term activity; so, most of the time, the ship is dry-docked and

stays in dock on average between 10 to 12 days. Finally, the sector has the characteristic of a service

industry with the aim to assure safe shipping and maritime operations and clean seas.

Traditionally, ship-building and ship-repair existed at the same shipyard; however, due to the differences

in the nature of each activity, the industry has not grown together. Shipbuilding is generally seen as more

attractive and higher on the value chain and less labour intensive and therefore more preferred by the

developed shipbuilding nations. On the other hand, although developing nations have recognized ship-

repair not only attractive but also useful for generation of jobs and regular revenues; yards have been

known to shift from ship repair to shipbuilding as they have acquired better skills and improved their

infrastructure.

In order to gain economy of scale, there is also a clustering of shipbuilding and ship repair industries at

different locations. Within leading shipbuilding nations there are dedicated shipyards for shipbuilding and

ship-repair activities in order to achieve a more focussed work force and production efficiencies. China

for example has 176 dedicated ship repair yards in addition to 316 shipbuilding yards. South Korea,

Japan, and China are better known as shipbuilding countries, whereas Singapore (being one of the main

repair countries in Asia with a share of approx 20% of the global market), Dubai, Bahrain and Colombo

have emerged as ship repair centres. However, combined shipbuilding and ship repair yards are also

operating fairly successfully in pockets in Eastern Europe, Russia and India with a view of product

portfolio diversification and to mitigate the risks of downturn cycle.3

Focusing on the development of ship-repair sector, it‟s has generally been considered as an evergreen

industry. The strong growth of the world fleet from 660 mln dwt in 1990 to 1,040 mln dwt in 2007 (1.468

in 2011), has lead to an equal growth of opportunities for ship repair and conversions4. Worldwide, the

annual turnover in ship repair has been estimated at USD 10-12 billion5.

The fleet requires a regular inspection and maintenance of equipment and machinery. Ships are also

generally governed by scheduled periodic repairs for which the Classification Society and other Statutory

Bodies have formulated guidelines for periodic survey such as: Special Hull and Machinery survey every

five years, Dry-docking at two and half years, and Hull and Machinery annual survey every year. Hence,

2 CESA (2.010): Annual Report 2.010-2011 3 Report of working group for shipbuilding and shiprepair industry for the Eleventh five year plan (2007-2012).

Government of India. MINISTRY OF SHIPPING, ROAD TRANSPORT & HIGHWAYS March 07 4 ENTR/06/05. The Study on Competitiveness of the European Shipbuilding Industry. Within the Framework

Contract of Sectoral Competitiveness Studies – Ecorys research and consulting. 5 CARE, 2008, The shipbuilding industry




D.1.3


ship-repair yards use to have continuous and consistent flow of business which makes shiprepair revenue

generation more predictable as opposed to shipbuilding or shipping, which is often prone to pulls and

pressures of market forces and cycling changes.

The OECD6 expected a worldwide growth of 110% between 2007 and 2015 with the respect to the

number of ships needing reparation. This doubling of demand (in terms of turnover) in the repair industry

has several reasons: the increase of the global fleet, the increased complexity of modern ships requiring

more regular maintenance, and more inspections leading to more frequent maintenance and unscheduled

repairs.

Next to repairs, conversions have become increasingly popular in the past years as ship-owners tried to

overcome high new build prices and long delivery times by adapting existing vessels for different roles.

Given these long lead times of up to 4 years, conversion of vessels was often preferable for owners. For

example, it was recently reported by Det Norske Veritas (DNV)7 that the conversion market was very

active, and that it had classes about 40 re-deliveries by the end of 2007. Whether the economic crisis will

have a negative impact on the conversion market remains to be seen. On the one hand overall demand for

ships has reduced, but on the other hand owners may try to convert vessels currently active in lean

segments to become usable in other trades that are less affected by the crisis.

The position of Europe in the ship repair market is relatively strong; according to the Study on

Competitiveness of the European Shipbuilding Industry, total turnover in this industry was €3.5 billion in

2007 (in 2003, the European repair industry was estimated to have a share of 42% in the global repair

industry). Compared to the estimated size of the world repair market this represents a share of some 35%.

However, because of the labour intensity of the repair industry, a shift to lower cost countries like China

and Vietnam, but also to Eastern Europe, can be expected.

6 See OCDE 2008 The interaction between the ship repair, ship conversion and shipbuilding industry. 7 “DNV makes safety pledge on single hull conversions” – Lloyds´s List 14/11/07




D.1.3


2.1.1 The World Fleet

Over the last 100 years, there has been steady growth in the total fleet as trade has increased.

As it can be seen from the table 1 below, we have a steady increase of ships reaching 1 billion GTs in

2011 for the world Merchant Fleet and 218 million GTs for the European Fleet.

Table 1: THE EEA REGISTERED AND WORLD FLEET DEVELOPMENT

As at 20 July 2011 (100 GT and above)

YEAR

EEA WORLD EEA AS%

OF WORLD N Mn N Mn

2000 6 783 84 351 GT 45 023 518 221 GT 16,3

2005 9 047 154 332 GT 46 801 618 109 GT 25,0

2006 9 037 156 907 GT 48 096 660 749 GT 23,7

2007 9 168 161 719 GT 49 705 704 604 GT 23,0

2008 9 732 181 668 GT 51 687 770 980 GT 23,6

2009 9 959 193 807 GT 53 108 824 692 GT 23,5

2010 15 086 209 079 GT 82 351 915 975 GT 22,8

2011 15 282 218 936 GT 85 561 1 000 178 GT 21,9

Source: Lloyd’s Register-Fairplay: Merchant Fleet

Source for 2010-2011: Clarksons Research Ltd: Commercial fleet

(taken from ECSA Annual Report 2010-2011)

This boom in shipping coupled with greater demand for safety at sea, more stringent inspections and

statutory requirements etc., will result in concurrent demand for suitable repair and dry dock facilities in

Europe and also on a global scale.

Figure 1: EEA Registered and world fleet development as at 20 July 2011

-

20,0

40,0

60,0

80,0

100,0

2.005 2.006 2.007 2.008 2.009

2.010 2.011

9,0 9,0

9,2 9,7 10,0 15,1

15,3

46,8 48,1 49,7 51,7 53,1

82,4 85,6

Nu

mb

er o

f Sh

ips

* 1

00

0

Year

THE EEA REGISTERED AND WORLD FLEET DEVELOPMENT ( Number of ships) N- EEA N - WORLD




D.1.3


2.1.2 The Potential Market

The starting point for any discussion of ship repair is the numbers of ships to be repaired and the

opportunity for a shipyard, or the shipyards in a region to access the market that they represent.

The market potential of the European ship repair industry is much more than what is presently being

undertaken.

According to the Review of Maritime Transport report adopted in 2010, by the UNCTAD8 of the Top 35

Countries and territories with the Largest Controlled Fleets, there are 15 in Europe (including Turkey), 16

are in Asia, and 4 are in the Americas, while none are in Africa or Oceania.

Together, the top 15 European ship-owning countries and territories (in terms of dwt) control 41% of the

world tonnage. (See table 2)

Table 2: Top European Countries and territories with the Largest Controlled Fleets as of January 1, 2010.

(including Turkey)

Number of vessels a Deadweight tonnage (* 1000)

Country or

territory of

ownership b

National

flag

Foreign

flag Total

National

flag

Foreign

flag Total

Foreign

flag as a

% of total

Total as a %

of world

total.

Greece 741 2409 3150 58478 127617 186095 69% 15.96%

Germany 458 3169 3627 16926 86969 103896 84% 8.91%

Norway 820 1148 1968 14102 26416 40519 65% 3.48%

Denmark 360 580 940 12937 20261 33198 61% 2.85%

United Kingdom 357 437 794 8948 17263 26211 66% 2.25%

Italy 608 236 844 15277 7176 22454 32% 1.93%

Belgium 85 149 234 5581 6967 12548 56% 1.08%

Cyprus 129 206 335 3542 5339 8882 60% 0.76%

Netherlands 528 272 800 4828 3989 8818 45% 0.76%

France 180 224 404 2995 4391 7386 59% 0.63%

Sweden 136 217 353 1453 5570 7023 79% 0.60%

Turkey 558 664 1222 7139 9629 1677 57% 0.14%

Spain 173 231 404 1406 3839 5245 73% 0.45%

Switzerland 35 122 157 1023 2925 3948 74% 0.34%

Isle of Man 2 30 32 4968 4818 4823 100% 0.41%

European Total 4610 9400 14010 147500 318724 466223 68% 40.55%

World total 17279 21133 38412 368252 797468 1165720 68% 100.00%

Source: Compiled by the UNCTAD secretariat, on the basis of data supplied by IHS Fairplay.

a) Vessels of 1,000 GT and above, ranked by deadweight tonnage; excluding the United States Reserve Fleet and the United

States and Canadian Great Lakes fleets (which have a combined tonnage of 5.7 million dwt).

b) The country of ownership indicates where the true controlling interest (i.e. parent company) of the fleet is located. In

several cases, determining this has required making certain judgements. Thus, for instance, Greece is shown as the country

of ownership for vessels owned by a Greek national with representative offices in New York, London and Piraeus, although

the owner may be domiciled in the United States.

c) Includes vessels flying the national flag but registered in territorial dependencies or associated self-governing territories

such as the Isle of Man (United Kingdom), and also second registries such as DIS (Denmark), NIS (Norway) or FIS

(France). For the United Kingdom, British-flag vessels are included under the national flag, except for Bermuda.

8 Review of Maritime Transport 2010, UNCTAD




D.1.3


In terms of ship types the European and World Commercial fleet is distributed as indicated in the table 3

below.

Table 3: EEA AND WORLD COMMERCIAL FLEETS

As at 20th July 2011 (100 GT and above - thousand tonnes)

EEA FLEET WORLD FLEET

TYPE No GT DWT No GT DWT

DRY BULK & COMBO 1388 51609 93409 8553 319367 576365

OIL TANKERS 1972 62888 113143 11389 257535 463439

TANKERS (parcel & spec) 463 3189 4868 1865 14570 23147

LPG +LNG 241 8285 7747 1561 48846 43081

CONTAINER 1193 46562 52894 5056 165847 191996

GEN CARGO 1543 3042 3879 16569 34636 46617

MULTI PURPOSE 1068 5921 8046 3049 20064 27161

RORO 509 9207 4764 2239 16906 9730

PURE CAR CARRIERS 123 5415 1888 693 31149 10657

REEFERS 147 776 831 1758 6097 6373

CRUISE 128 5577 636 362 16422 1716

FERRIES 2092 8834 1695 5999 16066 3647

TUGS 2048 597 270 14220 3939 1516

DREDGERS 654 1525 2061 2026 3984 4659

OFFSHORE 1621 5374 5380 9861 44051 57791

OTHER NON CARGO 92 127 53 361 691 246

TOTAL 15282 218928 301564 85561 1000170 1468141

Source: Clarkson‟s Research Ltd (taken from ECSA Annual Report 2010-2011)




D.1.3


2.2 Characteristics of the Repair Market

Ship owning is international, and in principle ships can repair anywhere in the World.

The major drivers for where a ship is repaired are usually costs, time, and in a lesser way technology.

Costs

Ship repair costs are generally evaluated in terms of total expenses directly and indirectly in deciding the

yard for ship repair. The factors that affect costs are9:

a. Revenue Loss. This is the charter income loss while the ship is undergoing repair in the dry dock.

b. Operational Expenses. During repairs the ship does not earn but has to continue to bear operational

expenses like crew wages, etc.

c. Docking Expenses. This is one of the most expensive part of any ship repair activity. Hence, the

ship owner and the ship-repair yard emphasis on keeping the ship in dock for the least number of

days.

d. Mobilisation of Ship. The ship is towed/sailed to the ship-repair yard from its last unloading port.

This has operational expenses whereas the revenue part is totally absent.

e. De-mobilisation of Ship. The ship sails from the repair yard to the loading port. Once again

operational expenses are incurred without earning revenue.

The ship owners analyse all the above factors contributing to the repair bills before deciding on the yard

for repairs.

Time

Sometimes, time becomes the most important factor above all else. The ship repair industry is highly

competitive and in the prevailing market scenario the level at which the time charter and freight earnings

are set the lay-up time for repairs is critical and completion of repairs on time is of paramount importance.

Therefore, those yards, in the vicinity of major trade routes or destinations, that can complete the repair

work in the shortest time will be preferred.

Technologies10

The technologies employed in ship repair have undergone major changes in recent years, resulting in a

drastic reduction in docking and lay up time for repairs. Many yards have invested in sophisticated

equipments to ensure high safety and environmental standards when carrying out maintenance and

repairs, such as the replacement of steel plates, the cleaning of tanks and so on. In addition, modern

vessels are increasingly complex, with automated systems that require constant attention as well as

regular maintenance and rectification and this has also increased the need for greater sophistication and

skills on the part of the service providers.

However, despite advances in technology (such as robotics, modular fabrication, advanced IT systems

and procedures), ship-repair remains a labour intensive business, as virtually every job will be unique in

some respect (e.g. the amount, nature and location of steel replacement) so automation is not always an

available solution.

This labour intensity means that facilities that have access to ample skilled, low cost labour will have a

cost advantage for less complex repair/maintenance work over their competitors in higher cost centres,

even if they cannot match them in terms of technology.

9 Report of working group for shipbuilding and shiprepair industry for the Eleventh five year plan (2007-

2012)Government of India MINISTRY OF SHIPPING, ROAD TRANSPORT & HIGHWAYS March 07 10 “The Interaction between the ship repair, ship conversion and shipbuilding industries report”, C/WP6(2008)6




D.1.3


According to the “Interaction between the ship repair, ship conversion and shipbuilding industries report”,

the selection of the appropriate ship repair centre has become crucially important to ship-owners, who

frequently must decide between the choice of a financially attractive low-cost centre with the need for a

certain degree of reliability and technical sophistication.

Therefore, while some owners will be drawn to lower cost yards in locations such as China (because of

favourable steelwork replacement costs), others may choose yards elsewhere that might offer (albeit at

higher cost) specialised vessel servicing and overhaul. For example some European and USA repair yards

have established a significant niche in the cruise ship sector.

The availability of these different alternatives, give ship-owners significant opportunities to select the

service of their choice, but significantly they may not always be able to effectively exercise that choice.




D.1.3


2.3 The structure of ship-repair by main regions

2.3.1 Europe

The map below (figure 2) presents both European new building yards and repair yards represented by

CESA (367 Shipyards in 14 Countries).

Figure 2: European yards represented by CESA

Source: CESA web page.

According to the “Interaction between the ship repair, ship conversion and shipbuilding industries report”,

European repairers, faced with strong competition from lower cost repairers in Singapore, China and the

Middle East, have focused their attention on intra-regional markets, as well as more complex conversion

and specialist activities. Privatization, restructuring, and a shift to more flexible work practices

encompassing a greater degree of subcontracted work, have characterized European repair developments

since the 1990s (OSC 2002). Emphasis on quality, expertise, and tight scheduling has also helped bolster

repair/conversion activity among some European yards.

In what concern current revenues, in its 2010-2011 Annual Report, CESA estimate that the total

production value of repair and conversion industry was in 2010 €3.2 billion, which represents

approximately 16% of the total production value of the European new building market for ships. In 2008

it was a 21%. This value is similar to the total production value in 2006 and an 8% lower than the

previous year. It is a consequence of the economic recession.

The actual market conditions have seen a reduction of about 25% on work content (up to the limit

allowed by Classification Societies) as ship operators/owners try to reduce costs due to lower freight rates

on one side but also because the bill would be settled by using bank credit allowances and repaid to the

lender during the next ship operation period (usually three years). The actual credit restrictions in

shipping are creating additional difficulties to the ship operators/owners and consequently to SMRC

yards.




D.1.3


Regarding the turnover in repair and conversion, the usual picture has change a little the last year. The

top three players in new-building were in 2010 Germany, Norway and Italy; and the largest countries in

repair and conversion were others: Germany, Netherland and Poland, to be followed by the UK, Italy and

Spain. Italy, with total ship repair revenue of 270 million Euros in 2010 (a 22% lower than the previous

year) fallen in the repair turnover ranking from the 3rd to the 5th position. By other hand Poland repair

turnover grew a 40% from the previous year, taking them to the 3rd position in the ranking.

Figure 3: New-buildings: Value of completions in 2010

Source: Source: CESA Annual report 2010-2011

Table 4: Repair industry turnover of European countries between 2006 and 2010

2006 2007 2008 2009 2010

Croatia 34 33 55 49 46

Denmark 100 140 170 160 180

Finland n/a n/a n/a n/a 45

France 100 135 135 123 120

Germany 747 955 1100 1100 937

Greece 86 108 117 87 38

Italy 330 351 395 350 270

Lithuania 66 74 87 61 60

Malta 57 49 n/a n/a n/a

Netherlands 525 664 750 485 420

Norway 90 90 110 48 50

Poland 180 304 235 250 350

Portugal 121 132 172 146 90

Romania 69 54 46 26 34

Spain 275 350 403 280 253

UK 300 252 270 280 284

TOTALS 3080 3691 4045 3445 3177




D.1.3


Figure 4:2010 Top 7 players in Maintenance, Repair & Conversion Sector in Europe.

Source: CESA Annual Report 2010-2011

Figure 5: Rest of players in Maintenance, Repair & Conversion Sector in Europe.

Source: CESA Annual Report 2010-2011

0

200

400

600

800

1000

1200

Germany Netherlands Poland UK Italy Spain Denmark

mil

lon

Eu

ro

Maintenance, Repair & Conversion Turnover 2006 - 2010

2006

2007

2008

2009

2010

0

20

40

60

80

100

120

140

160

180

200

France Portugal Lithuania Norway Croatia Greece Romania

mil

lon

Eu

ro

Maintenance, Repair & Conversion Turnover 2006 - 2010

2006

2007

2008

2009

2010




D.1.3


Although large new-building countries are usually large repairers, there is a distinct pattern in

specialization in ship repair versus ship new-building in Europe, with some countries mainly specializing

on ship repair while others fully concentrate on new-building activities.

Figure 6 indicates the relative importance of repair compared to new-building in terms of turnover by

country. It clearly shows that while Greece, UK, Portugal, and to a lesser extent Poland are dominated by

the repair industry, while on the other side countries like Norway, Finland, or Croatia are almost fully

focused on new-building.

Figure 6: Share turnover in repair and new-building by European countries in 2010

Sources: CESA Annual Report 2010-2011

* No data available for Turkey and Malta

The top three countries with relatively more turnover from repair than from new-buildings have one

characteristic in common: they are all located along major shipping routes. The repair industry is very

much geographical oriented as to be efficiently accessible by their customers. Despite the difficult market

situation, the geographic location remains a benchmark of competitiveness in the global maintenance

/repair industry.

However, strong competition is felt from the Black Sea area due to lower labour cost, especially from the

region of Tuzla in Turkey. To be also highlighted the total turnover related to ship repair & conversion

activity in Romania increased in 2010 with 25% in comparison with 2009.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Gre

ece

UK

Port

uga

l

Pola

nd

Lith

uan

ia

Den

mar

k

Net

her

lan

ds

Ger

man

y

Spai

n

Ital

y

Fran

ce

Ro

man

ia

Cro

atia

Fin

lan

d

No

rway

Bu

lgar

ia

Share Turnover in repair and newbuildings by European

countries in 2010 % Newbuildings % Repair




D.1.3


2.3.2 South Korea

For years already, South Korea is world leader in shipbuilding. Besides, it maintains a successful balance

between ship repair and new building activity and continues to broaden its capability to handle a broad

range of commercial vessels, perhaps benefiting from the restructuring that followed the Asian financial

crisis in the second half of the 1990s (when the Won lost about 40 - 50% of its value in four months).11

Several major conglomerates are based in Korea. They are often both shipyards and marine equipment

manufacturers, and many of them are also active in various other industrial segments.

In the repair segment the Korean key players have different strategies: for repair works, Hyundai Heavy

Industries has a yard (Vinashin) in Vietnam. Through a joint venture, Daewoo Shipbuilding & Marine

Engineering (DSME) is established in Europe (Deawoo Mangalia Heavy Industries (DMHI)). With a

focus on both bulk and container carriers as well as ships repair, DMHI delivers a variety of products and

after sales service at this site. DSME envisages opening also a ship repair yard in Asia12.

2.3.3 China

According to the Research Report on Chinese Ship Repair Industry, 2010-2011, the world ship repair

centre has been transferred to the region represented by China and has taken shape preliminarily,

providing the opportunity for the development of Chinese ship repair industry. The advantages of Chinese

ship repair industry in costs, geography and economic development will long exist. More than 100

professional ship repair stations and paint bonded warehouses were established in such coastal provinces

and cities as Shanghai, Guangzhou, Qingdao, Tianjin, etc.

The aforementioned report underlines that:

“The modernized development of Chinese industry is in the primary stage at present. The labour-

intensive advantage will be replaced gradually by technology and capital intensive advantages.

The transition period, which is about 10-20 years, will be the golden age of Chinese repair

industry. An enormous amount of international and domestic investments will be attracted to this

industry.”

“In recent years, the construction of repair docks in China is sped up and great achievements have

been made. The reserving volume of Chinese repair docks also acquires a higher ranking in the

world. By the end of 2008, the reserving volume of 50,000-ton and above repair dock in China

reached 59 with a capacity of near 8.39 million tons. The repair volume of major ship repair

enterprises came to about 5,310, roughly 100 million DWT. The repair volume of foreign ships

exceeded 1,784 with a total weight of 81.84 million DWT.”.

Regional Activities: Effect of the Economic crisis

Since the second half of 2008, the ship repair industry in China has been severely affected by the global

financial crisis. In 2009 the output value and the number of ships repaired see a year-on-year slump of 30

percent.

Due to the flat market, declining demand and decreasing shipping volume, ship owners have no sufficient

capital for ship repair and thus risks of abandoning ships and cancelling orders jump. There is also an

apparent decrease in the amount of container ships arriving China's ports because of the sudden slump of

European and American sources. It is said that the amount of container ships arriving at China's ports

11 “The Interaction between the ship repair, ship conversion and shipbuilding industries report”, C/WP6(2008)6 12 ENTR/06/05. The Study on Competitiveness of the European Shipbuilding Industry. Within the Framework

Contract of Sectoral Competitiveness Studies – Ecorys research and consulting.




D.1.3


showed a year-on-year drop of 50 percent, which affected the number of foreign container ships repaired

in China.

At the same time, China's steel output is also strongly affected by financial crisis. Fewer foreign ore

carriers come to China, which hinders the repair and refit of ore carriers.

Due to the difficulties for ship owners to borrow loans from bank, many orders are cancelled and some

ship building enterprises even switch to ship repair, which contributes to a more fierce competition

among China's ship repair industry.

2.3.4 Japan

The Japanese shipbuilding industry has been dominant in the global shipbuilding industry since the

1970s. Between 1970 and 1990 the order-book of Japan rose, mainly based on technical inventions.

Nevertheless since the 1990s they lost their market share to lower cost countries like South Korea and

China.

Japan‟s higher labour costs has made it less competitive in the repair market than the competition in

China, Korea and Singapore, and it is understood that this has led Japanese repair yards to concentrate on

domestic niche markets where efficiency and automation, rather than simply low costs, can give them a

competitive edge. By doing this Japan will maintain a strategic level of ship repair capability, even

though the market share of its shipbuilding industry has declined following its dominance in the 1970s

and 1980s. 13

2.3.5 Singapore14

Singapore has traditionally been a very active ship repair and conversion centre, its dedicated yards

benefiting from its strategic position in one of the busiest sea-lanes in the world and the popularity of its

port (also one of the busiest in the world). Its reputation for high quality work and its unparalleled

location are key factors for Singapore continuing as a significant repair/conversion centre in the future. In

addition, there is evidence that Singapore yards are increasingly looking at new-buildings to diversify

their activities.

Also, Singapore has sought to maintain its leading role in ship repair by entering into alliance agreements

with major ship owners and operators, and attempting to retain its long-standing reputation as a relatively

low cost centre by hiring labour from lower cost sources such as China, Malaysia, India and the

Philippines.

13 “The Interaction between the ship repair, ship conversion and shipbuilding industries report”, C/WP6(2008)6 14 “The Interaction between the ship repair, ship conversion and shipbuilding industries report”, C/WP6(2008)6




D.1.3


2.3.6 Emerging shipbuilding nations

A number of countries can be seen as potential new challengers to the existing shipbuilding nations. In

this section a brief description is presented of India, Vietnam, the Philippines, and Brazil.

India

India is an emerging country in many sectors. As of August 2007, India had the fourth largest orderbook

of the world representing 1.2% of the total world market, thus being larger than any of the European

shipbuilding countries. However, end of July 2008, they were passed by the fast growing Vietnam and

Philippines, and are now ranked sixth15.

Although India has not traditionally been considered as a ship repair/conversion centre (except for

domestic users), since it is located strategically on the international trade route, the country can offer ship

repair and maintenance services to ships plying from west to east in the trade route.

Curiously, the Indian ship repair industry is highly regulated through Ship Repair Units (SRU) which are

registered and licensed by the Director General of Shipping to enable them to avail Custom Duty and

other concessions for undertaking ship repairs. There are a total of 35 SRUs registered with the Director

General of Shipping of which only 7 have been given the permanent approval as SRUs. All other SRUs

are given licenses for a limited duration which are periodically renewed by DG Shipping for specific

activity such as repairs to Navigation/communication, Hull or Machinery as the case may be depending

upon their capabilities, infrastructure and facilities. In addition to the Shipyards there are dry-docks

available with the Port Trusts which can also be used for limited repairs of ships.16

Potential Market

As has been published in the report “Working Group for Indian Shipbuilding and Ship Repair Industry for

the Eleventh Five Year Plan (2007-2012)” by the Government of India, the existing docking facilities had

not grown to meet the requirements of modern tonnage. This meant that with the commencement of new

refineries on the Indian coast, the number of VLCC‟s used on those trades is bound to increase, with

growing potential for the docking of such vessels.

Moreover, as underline in the “Strategic Analysis of Shipbuilding and Repair Market in India”, the

shipbuilding and repair market is poised to pick up momentum with the increasing penetration of Indian

ship building companies in the offshore vessels (OSVs) segment. Indian companies have established

strong credentials in the building and repair of OSV, resulting in a spike in orders for such vessels from

the Indian industry. The limited capacities related to OSVs in leading shipbuilding nations such as Japan

and South Korea are resulting in diversion of orders to India, driving up the fortunes of the Indian

shipbuilding and repair market.

However, although the outlook for the market is bright, there are underlined in the aforementioned report,

some challenges clouding its landscape. India has a vast coastline, but there is an acute shortage of deep

draft water space along the coast. This restricts the type and size of ships that can be repaired in India,

thereby severely curbing the full growth potential of the Indian shipbuilding and repair market.

15 CARE Research 2008. The shipbuilding industry. 16 Report of the “Working Group for Indian Shipbuilding and Ship Repair Industry for the Eleventh Five Year Plan

(2007-2012)” by the Government of India.




D.1.3


Vietnam

Vietnam is also a fast growing shipbuilding country, mainly on the basis of its low cost labour sources,

the support from the Vietnamese government and the availability of infrastructure. They ranked fourth in

the world in terms of order book on December 31st 2008, before India and European players like

Germany and Turkey17. However, the production capacity is still very limited.

While it is understood that the majority of this foreign involvement is focused on new-building facilities,

there will be an inevitable flow-on effect on other Vietnamese facilities; especially the older ones that

may no longer be attractive for new-building construction, but which may find a niche by providing repair

and conversion services. 18

17 Lloyds Register Fairplay 18 “The Interaction between the ship repair, ship conversion and shipbuilding industries report”, C/WP6(2008)6




D.1.3


3 Competitive Analysis of the Repair sector in Europe

This section is intended to provide an overview of the interactions between different environmental

aspects that affect the competitivity of the European Repair Shipyards but it is not intended to be an

exhaustive macro and micro environmental analysis of the ship repair sector.

3.1 Macro environmental Analysis on Ship Repairing Industry

For the purpose of analyse the ship repair industry Macro environment, a PEST model will be used. This

model divides and analyses the general environment into the following four categories:

1. Political / Regulatory

2. Economic

3. Social

4. Technological

The four aspects of the environment and their impact on the shipbuilding industry are discussed below:

Figure 7: PEST model for the European Ship-Repair Industry.

Economic

• Industry Growth• Economic and Financial Crisis

Social

• Environmental requirements• Climate Change• Antipollution rules

Political/Regulatory:

• Government Support• International Maritime Organisation (IMO)

Technological

• Technology innovation.• Process Improvement

Competition rivalry

within the Industry




D.1.3


3.1.1 Political/regulatory factors

The wider regulatory framework makes stricter entry barriers into the industry, and adds costs to the

compliance of such regulations.

a) Government Support

In the past, there have been few formal rules for governing the shipbuilding and ship repair industry and

in certain countries shipyards are State supported. Governments support shipyards through subsidies like

in India19, China etc, or investing in capacity such as green-field investment and new facilities in low cost

regions like Vietnam, Philippines, etc.

As an example, accordingly with “The report on the Chinese shipbuilding industry: targets after 2008”,

China will extend the policy of giving a 17 percent subsidy on ship prices for domestic oceangoing ship

buyers till 2012 and also offer preferential interest rates to shipbuilders, as a part of the stimulus package

for the industry.

At the international level, multilateral cooperation on competition issues takes place through various

channels, including the International Competition Network, the OECD Competition Committee and the

World Trade Organisation. However, discussions on designing a multilateral agreement on competition,

(e.g. under the WTO) have as yet not materialized.20

The WTO sets rules for international trade, consisting among others of rules on tariffs, standards,

intellectual property rights, services and some non-tariff measures.

In spite of all, the WTO rules on subsidies and various other relevant agreements and regulations, it has

proven to be difficult to establish a world level playing field. Especially in times of an economic

downturn, national stimulating programs are a popular means. The line between market distorting state

aid and non-distorting government support seems to be difficult to draw. 21

At a bilateral level, competition issues are included in various bilateral agreements. The EU has

established cooperation agreements on competition policy with the USA, Canada, Japan and South Korea.

At EU level, the main common rules on competition are laid down in art. 81 – 89 EC Treaty, with article

87 being the main substantive article on state aid. Art. 87 (1) in principle prohibits state aid distorting

competition. Art. 87 (2) and art. 87 (3) respectively give some de iure derogations and some discretionary

derogations from this incompatibility of state aid with the common market.

Based on these provisions and their derogation possibilities, various rules have been laid down for

specific areas, setting precise conditions for such derogations.

Under the “Shipbuilding Framework”22 the provision on Aid to research, development and innovation

justifies aid for innovation in existing shipbuilding, ship repair or ship conversion yards up to a maximum

aid intensity of 20 percent gross, given that:

19

http://www.globalsecurity.org/military/world/india/shipbuilding.htm 20 ENTR/06/05. The Study on Competitiveness of the European Shipbuilding Industry. Within the Framework

Contract of Sectoral Competitiveness Studies – Ecorys research and consulting. 21 ENTR/06/05. The Study on Competitiveness of the European Shipbuilding Industry. Within the Framework

Contract of Sectoral Competitiveness Studies – Ecorys research and consulting. 22 The Shipbuilding Framework (2003/C 317/06) entered into force on 1 January 2004, and was recently prolonged

for the second time until December 2011.




D.1.3


“it relates to the industrial application of innovative products and processes, i.e. technologically new

or substantially improved products and processes compared to the state of the art existing in this

industry in the Community, which carry a risk of technological or industrial failure;

the aid is limited to supporting expenditure on investments, design, engineering and testing activities

directly and exclusively related to innovative part of the project. (…).”

Under the existing framework, various innovation aid schemes at national level have been approved as

being compatible.

b) International Maritime Organisation

Currently the International Maritime Organization (IMO) is also responsible for setting up rules and

regulations governing the shipbuilding industry23.

The work in the MEPC during the last twelve months was focussed on the efforts to regulate the emission

of greenhouse gases from international shipping. CESA supports in principle the European strategy to

reduce emissions from international shipping by 20% by 2020 with 2005 emission levels as reference.

Globally applicable regulations as well as the retrofitting of existing ships are, however, prerequisites to

achieve this goal. 24

Market based measures (MBM) such as emission trading schemes or a bunker levy in conjunction with an

international compensation fund, are the solutions preferred by the European shipbuilders. Such

instruments could provide both the incentives and flexibility necessary to stimulate the technical

innovation and to enforce the demand of available technology as well as a level playing field for all flag

states. However, since no consensus has been reached with the developing countries on the IMO principle

of “no more favourable treatment”, it is unlikely that a MBM will be approved in a short term.

3.1.2 Economic factors

Due to the present economic recession, the demand for ship repair and conversion is lower than years

before.

Ship-owners and shipyards are still confronting with financing and cash flow difficulties. With falling

trade volumes in 2010, prospects remain difficult and uncertain for the shipping industry and in particular

for the repair, refit and conversion sector. The conversion of shipbuilding facilities into repair facilities is

also a threat by the sector.

However, the prospect of world ship repair market is optimistic. According to the report "The World Ship

Repair Market to 2015" published by U.K.-based Ocean Shipping Consultants: “the weakening world

economy and depressed freight rates are expected to test the resolve of ship-repair industries, intensifying

competition and leading to further rationalisation. Pressure to improve maintenance standards and vessel

safety is mounting, with the new IMO environmental regulations regarding climate change and

antipollution rules set to have a profound impact on fleet developments and repair demand through to

2015.”

23 http://www.imo.org/newsroom/contents.asp?topic_id=82&doc_id=369 24 CESA (2010). Annual Report 2010-2011.




D.1.3


3.1.3 Socio-cultural factors

In recent decades, expanding economic activity has been accompanied by growing concerns about

climate change and environmental pollution. The challenge of climate change is an emerging top priority

issue which have some serious implications for the shipping sector.

The United Nations Climate Change Conference held in December 2009 under the auspices of the United

Nations Framework Convention on Climate Change (UNFCCC) came to a conclusion having taken no

specific decision regarding shipping. Therefore, the International Maritime Organization (IMO) has

continued its work on some of the main issues under consideration, specifically: the mandatory

application of technical measures developed by IMO‟s Marine Environment Protection Committee

(MEPC) (e.g. the Energy Efficiency Design Index (EEDI)) and the adoption of market-based measures,

such as imposing a levy or tax on ship bunker fuel, and emissions trading.

Whatever the outcome of the aforementioned work, the shipping industry is expected to play its role in

addressing the climate change challenge.

By one side, Ship owners and operators, in an effort to protect the environment, must retrofit their

existing fleet to make it more environmentally friendly using green technologies. Retrofitting of the

existing merchant fleet is the key issue for the implementation of new environmental requirements in

European waters and in other ecological sensitive sea areas world-wide, which has been unanimously

adopted by IMO.

By other side, ship conversion and repair industry which obviously impact on the environment must

address technological changes and innovative, environment protective solutions with reference to

particular shipyard processes to fulfil a wide range of constantly increasing requirements in the scope of

environmental legislation and regulation.

That being said, a new international regulatory scheme to address the climate change challenge in

maritime transport would change the industry‟s regulatory landscape and would entail adjustments in

operations, equipment, management, energy use, and technology uptake, as well as costs.

3.1.4 Technological factors

Industry leaders and policy makers have looked at innovation as the key to making radical improvements

in corporate environmental practices and performance.

High standards are not only crucial for further improvements in ship safety and marine environment

protection but also they form the basis for the competitiveness of innovative high-tech shipbuilders.25

Most ship-repair companies are making use of technology to attain higher production levels and greater

efficiency.

However, despite advances in technology, ship repair remains a labour intensive business unique in some

respect so technologies are not always an available solution.26

25 CESA (2010). Annual Report 2010-2011. 26 “The Interaction between the ship repair, ship conversion and shipbuilding industries report”, C/WP6(2008)6




D.1.3


3.2 Micro environmental Analysis of the European Ship Repairing Industry

For the purpose of analyse the ship repair industry structure, a Michael Porter‟s five force model27 will be

used. It draws upon Industrial Sector economics to derive five forces that determine the competitive

intensity and therefore attractiveness of a market. Three of Porter's five forces refer to competition from

external sources. The remainder are internal threats.

Porter referred to these forces as the micro environment, to contrast it with the more general term macro

environment. In our case, they will consist of those forces close to the European Ship repair Industry that

affect its ability to serve its customers and make a profit (see figure 8).

As customer play a paramount role in this business, some questions relevant to this analysis, were

included in a dedicated questionnaire (Owner Survey) (see Annex 6), which was generated and circulated

amongst ECO-REFITEC participating project members for gather some relevant information from their

customer to inference possible threats.

Figure 8: Porter‟s Five Forces of Competitive Position model for the Ship Repair Industry.

In the following paragraphs, the identified characteristics of the European ship repair industry have been

reported.

27

Competition in Global Industries by Michael E. Porter, 1986

Competition rivalry

within the Industry

Bargaining Power of customer

Threats of Substitutes

New Market Entrants

Supplier Power

Barriers to entry

Low

Increasing

Very High

Intense Rivalry




D.1.3


3.2.1 International trade barriers

There are high entry barriers in the shipbuilding industry in general (as in a ship repair sector in

particular).

Even though it is often argued that the shipbuilding industry is truly global and vessels can be repaired

anywhere without major restrictions, global trade rules are not equal, not complete and it is hard to apply

them. There are two issues to take into account:

International trade barriers consist of tariffs, barriers to services trade and non-tariff measures

(NTMs), some of which relate strongly to the shipbuilding sectors, some less;

The ship repair industry has a specific nature that defines market conditions and market

functioning slightly differently than the standard neo-classical market approach;

Moreover, in an age where globalisation is pressing forward rapidly and where international production

networks – driven by large multinational firms – dominate output developments, foreign direct

investments and investment barriers faced are of equal importance to international trade and the

competitive position of the shipbuilding sector.

The major barriers include huge capital investments, acquisition of highly specialized equipment,

establishing strong distribution networks to compete with existing firms, high taxes and tariff by

government, requirement of high-skilled labour, and flexibility in operations28. Due to these factors, most

potential entrants are reluctant to enter the industry.

In Europe, CESA and the European Metalworkers‟ Federation (EMF) share a common view on the

prospects and challenges European shipyards are facing. According with Committee discussions29,

Europe needs to put in place decisive response measures to avoid irreparable structural damages resulting

from massive global unbalances and unfair trade practices in Asia that unleashed during the crisis was

widely consented.

In what concern the Framework on State Aid to Shipbuilding (2003/C317/06), the Committee requested a

continuation and further improvement of provisions to support innovation and an amendment of new

provisions to facilitate the improvement of the environmental performance of the European maritime

sector. Strengthening the competitiveness of the European maritime industry should be the objective of all

provisions included in the Framework.30

28 Competition in Global Industries by Michael E. Porter, 1986. Chapter 17: The case of shipbuilding. 29 CESA and the European Metalworkers‟ Federation (EMF) established in 2003 the Social Dialogue Committee on

Shipbuilding and Shiprepair under the auspice of the European Commission DG Employment and Social Affairs. 30 CESA (2010). Annual Report 2010-2011.




D.1.3


3.2.2 High Bargaining power of buyers

The bargaining power of ship-owner in the ship repair industry is quite high.

According to the answer received to question 13 of the Owner Survey (see annex 6), European Ship-

owner bases their decision mainly on price and location, being important factor also the delivery time,

quality, experience and the shipyard resources and facilities.

According to the answer received to question 14 of the Owner Survey, without taken into consideration

the trading of the vessel, the owners show more confidence to make retrofitting projects in Europe, but

they are also willing to make retrofitting projects in other areas like North America or Asia.

The availability of different alternatives, give ship-owners significant power to select the service of their

choice, although they may not always be able to effectively exercise that choice.

Finally, owners usually select the equipment to be installed for a retrofit and they also provide the supply

of components. According to the answer received to question 5 of the Owner Survey, Owners only

require from the repair shipyards the installation and commissioning of the new equipment and in rare

cases their engineering services.

3.2.3 Low Threat of substitutes

The threat of substitutes in the ship repair industry is low. However the suppliers can represent a threat in

the retrofitting sector.

According to the answer received to question 4 of the Owner Survey (see annex 6), ship owner have

shown more preference to handle the retrofit integration work in dry dock outsourced to repair shipyards,

but they are also looking for solutions able to be installed on board while ship is sailing, in particular for

water ballast treatment systems.

3.2.4 Increased Bargaining power of suppliers

The bargaining power of equipment suppliers is growing in Europe and will be high in the ship

retrofitting industry.

Suppliers to the ship retrofitting industry will be mostly equipment manufacturers and these suppliers will

have high influence because the switching costs of suppliers will be high. Currently there is also the threat

of forward integration in the industry.

As geographical presence is very important for marine equipment suppliers, European marine equipment

suppliers want to attain a stronger global presence for companies in major shipbuilding regions. In this

respect, the European Shipyards can lose the advantage of closer marine equipment suppliers.

3.2.5 Intensity of Rivalry

The global shipbuilding industry is geographically divided among the major competitors. Competitors are

therefore identified by geographic locations rather than as firms.




D.1.3


The rivalry among firms in the shipbuilding industry is quite intense and is mostly based on price

competition. In addition, firms are diverse and can accept lower profits than competitors due to

differences in geographical locations and economic conditions. Pressures to improve profitability remain -

particularly among established yards - prompting mergers, re-organisation and significant investments.

Furthermore, because of the breakdown in the new building market, more yards are competing for repair

and conversion contracts.

Also, there is low product differentiation which results in higher competition for securing orders from

buyers. Besides there are high exit barriers in the industry due to high investments in facilities and

infrastructure making most firms reluctant to leave the market31.

However, there are some promising potentials for the yards by the increasing world fleet, the high share

of old vessels and the refitting demand due to tightened rules for ballast water management, slow

steaming operations, emission reduction and exhaust gas cleaning.

Following the conclusion of the report, "The World Ship Repair Market to 2015," published by U.K.-

based Ocean Shipping Consultants, the next years are expected to witness a number of significant

changes in ship-repair activity, with ongoing improvements in skills and quality of work offered by

emerging nations. Established repair centres are expected to intensify their efforts to secure market share,

concentrating on low deviation and specialist markets. Intense competition is expected to encourage

greater co-operation between yards over the forecast period, as well as improvements in working

practices, efficiency and safety.

31

Competition in Global Industries by Michael E. Porter, 1986




D.1.3


4 Current Organisational Structure and Strategy of the European

Ship repair Shipyards

The retrofit projects to be carried out in future for satisfying regulatory compliance according to the new

IMO and EU environmental regulations, may call for some changes in the shipyard production

organisation and strategy to achieve the targets in an economical, safe and environmentally friendly

manner.

To better assess the shipyard risk a better understanding of the shipyard organisation / strategy is required.

For the purpose of better knowing the shipyard organisation / strategy, a dedicated questionnaire,

Shipyard Questionnaire-Part A (see Annex 4), was generated and circulated amongst the ECO-REFITEC

participating project members for their inputs. The information gathered in the form of answers to the

questionnaires circulated has been a major factor towards the goal of understanding the existing

organisational structure /strategy among the repair shipyards. The inputs have been analysed to yield the

inferences drawn as given below.

4.1 Background

The key stages of a ship repair process were already explored in a European funded project called

SHIPMATES. In that project was developed a technology analysis tool in the form of an “Activity

MAP”32.

The “Activity MAP” provides an effective means of reviewing a ship-repair organisation and identifies

the way in which work and information flows.33 The basic structure of the activity Map is a matrix of

“Stages” of a contract and “Functions” found within a ship yard.

In the Eco-REFITEC Shipyard Questionnaire-Part A, it has been made use of those matrix activities. In

that way, the questions have been sort using the SHIPMATE structure.

32 SHIPMATES – Deliverable 1.3. Maritime Database of key areas with high impact on environmental and repair

costs. This document provides the shipyards with a means of assessing the current technology within their yard to

highlight areas for potential new technology to either provide a cost saving or to combat an environment issue raised

by operating practices. 33 SHIPMATES – Final Activity MAp (Deliverable 1.2)




D.1.3


Table 5: 34 Activity MAP for Ship Repair Sector as developed in the SHIPMATES Project.

Stage

Function Planning Design Production

Production

Engineering Quality Purchasing Commercial Human Outputs

Strategy

Market

Long term

Plans

Product

Development

Facilities

Plans

Long Term

Strategy ISO 9000

Supplier

Relations

Market

Strategy HR Strategy

Good

Enquiries

Enquiry Forward

Workload

Preliminary

Design

Resources

Needs

Special

Needs Quality Plan

Estimate

Prices

Tender

Documents

Resource

Loading

Quality

Tenders

Contract Contract

Plan

Functional

Design

Repair

Strategy

Repair

Strategy Quality Plan

Purchase

Long Lead

Cost

Analysis

Training

Needs Contract

Design Design Plan Detailed

Design

Design

Producibility

Design for

Production

Information

Quality

Purchase

Specification

Material

Costs

Training

Needs

Approved

Design

Materials Purchase

Plans

Materials

Specification

Stores

Control

Value

Analysis

Supplier

Approval

Purchase

Orders

Cost

Monitoring

Personnel

Supply

Materials

Available

Resources Resource

Needs

Sub Contract

Information

Resource

Management

Special

Instructions

Subcontracto

r Approval

Materials

Supply

Cost

Monitoring

Personnel

Supply

Resources

Available

Shop

Work Detail Plans

Production

Information

Equipment

Repair Work Study

Work

Procedures

Equipment

Supply

Cost

Monitoring

Personnel

Supply

Work

Complete

Ship

Work Detail Plans

Production

Information Repair Work

Production

Review

Work

Procedures

Supplier

Performance Test Results

Personnel

Supply

Ship

Acceptance

Invoicing Review

Hours

Design

Review

Contract

Review

Methods

Review

Quality

Guarantee

Purchasing

Review

Commercial

review

Personnel

Audit

Repeat

Business

34 SHIPMATES – Final Activity MAp (Deliverable 1.2). The basic map shows the main activities in the ship repair

business, identified by functional area of work and stage of a ship repair contract. The Activity Map can therefore be

considered as a hierarchy of maps, going into increasing detail of the activities required.




D.1.3


4.2 Major Inferences in light of answer to Eco-REFITEC questionnaire

4.2.1 Long Term Plans: Primary business area

Most of the participating yards are those involved in the ship-repair activities as their primary business.

But it can be seen from the inputs that the yards which have new-building capabilities have the necessary

structure and the hardware to carry out repair and retrofit activities parallel to the new-buildings. In the

likelihood both types of yards are able to handle retrofit activities anticipated for the greening of the fleet

motive.

All of the responding organisations have shown capability of handling major retrofitting and conversions

projects on ships and can address the retrofitting needs arising from the ships in the context of greening of

the existing fleet. The organisations have got the necessary facilities and resources to undertake the

retrofit projects and have shown competence and experience in dealing with such projects.

4.2.2 Product development

Most of the yards with ship-repair as their primary business sub-contract the engineering and product

design and development jobs to sub-contracting bodies, whereas the yards involved in the new-building

contracts have their own design office to provide design services.

The design specifications and the project requirements for a repair work are mostly decided by the vessel

owner and vary considerably from each vessel and are very well served by the 3rd party organisations.

The new-building yards have in-house design teams showing capabilities to provide the design solutions

to the repair projects as well.

4.2.3 Facility Plan

There is a wide range of facilities available within the different EU shipyards in terms of their

infrastructure to cater to the different sizes and types of ships calling at various yards. This varies

amongst the different shipyards and their existing docking facilities and the equipment available within

the yards. The facilities range from small vessels to large vessels up to 200000 DWT sizes.

Mostly the yards are catering to the needs of commercial vessels although some yards do undertake

military vessels‟ repairs as well. The yards have at present the necessary equipment and installed

machinery to carry out the rage of projects they undertake currently. 35

4.2.4 Environmental management

All the yards have a very well implemented waste management and disposal plan. The yard inputs show

that all the wastes generated from the yard operation is well documented and properly handled. Shipyards

have limited onsite facilities for the treatment of wastes like sludge treatment plant for the ship generated

oily sludge. The multitude of the types of the waste generated from the ship repair processes makes it

difficult for the yards to have onsite treatment facilities for each type of waste, but this is catered by

delivering the wastes to the organisations specializing in waste treatments specific for different types of

wastes which proves economical for the yards.

35 Accordingly with SHIPMATES – Final Activity MAp (Deliverable 1.2), the key problems faced by repair works

in repair shipyards are: 1. Measurement Techniques (Repair yards require flexibility of measurements techniques),

2. On board Cutting and welding Methods (included new materials) 3 Prefabrication …..




D.1.3


4.2.5 Dependence on sub-contractors

Suppliers are based locally and internationally as well but the majority of them for the partner shipyards

are local suppliers. The ship-repair supply chain network is an essential component of the business, and

the ship-repair companies and their suppliers are interdependent.36

The yards involved in the projects other than new-buildings have shown a stronger dependence on the

services provided by the sub-contractors both in terms of the supply of skilled workforce as well as the

provision of specialized equipment for certain tasks.

The sub-contractors have got their own equipment installed inside the yard for specific jobs. Whereas,

yards which undertake both new-building and repair projects operate with a lesser dependence on the sub-

contractors. In such cases the sub-contractors have no specialized equipment installed by them rather they

use the equipment provided by the shipyard within its premises.

4.2.6 Human Resource strategy: Work-force availability

The yards have a varying workload pattern and it fluctuates from time to time. These variations directly

affect the demand for the skilled workforce within the shipyards. Shipyards avail the services of the sub-

contractors which supply the required manpower during peak work load conditions. Trained work-force

for skilled jobs has been an issue with some yards while the yards with a comprehensive Human Resource

Policy have no issues regarding the availability of workforce. Issues within the yards regarding the

training of the personnel due to the lack of experienced trainers have also been stated by some of the

yards which need attention.

4.3 Major Challenges in the ship retrofitting

4.3.1 Project enquiry challenges

The main challenges/issues faced by the yards for Project Enquiry are:

Ascertaining the true scope of work at this stage is difficult. In general, there are differences

between the declared work before the ship arrival in the Yard and the work that is assigned when

the ship arrives in the Yard. This peculiarity of the ship repair business is a great challenge in

front of Yard management because this stage of the project is a base for planning of the Project.

Regional competition, distance/position of the yards to the main trade routes and yard reputation

for attracting the potential customers.

Audit to yard‟s facilities/procedures by the owner.

Evaluation of the competitiveness of the shipyard, its products and services provided to the

market

Determination of delivery conditions and time limits, adjustment of different interests between

marketing and production

Too long information feed-back time from suppliers and subcontractors regarding their offers

36 SHIPMATES – Final Activity MAp (Deliverable 1.2)




D.1.3


4.3.2 Production challenges

The production stage of a project very much depends on the planning activities carried out for the project.

At this stage a good coordination between project participants e.g. Design, Materials, Resources, Shop

Work etc. is needed. Despite of extensive involved in handling each project shipyards have certain issues

and challenges during the Production stage. The main challenges/issues in the production stage have been

identified amongst different yards are as follows:

The proper identification and the timely availability of the resources necessary for the project

under consideration.

The quality issues in terms of design quality, quality of technical specifications and the overall

quality of the project execution.

Budget development for the project and subsequent budget management.

Difficulties in terms of coordination between the various departments and subcontractors.

Timely execution of the projects due to unforeseen jobs.

Time taken for delivering the technical documentation from equipment suppliers.

4.3.3 Delivery challenges

The challenges during the delivery stage of the project are:

Meeting the delivery schedules.

Maintaining the specifications and the quality of the project.

Satisfactory trials and commissioning.

Design errors showing up during trials and tests.

Preparation of technical documentation.

Certification and approvals.

Preventing the delays due to difficulties in shipyard practices.

Cutting down unforeseen costs.




D.1.3


5 Analysis on Operation of Ship Repair Industry: Eco-REFITEC

Environmental Model

Strategy is the key to success in rivalry competition in the midst of a rapidly changing business

environment. As the industry has special characteristics and competes globally, ship repair industry

requires a strategy that can create competitive advantage.37

5.1 A reference Ship Building and Ship-repair model

In this section is presented by its interest, two specific Ship repair and New Building environmental

models developed by Ma‟ruf, B for the Indonesia Shipbuilding Industry which can be used by medium

size ship shipyards in formulating strategy38 to create sustainable competitive advantage.

These models are based on the dominant factors (external and internal) and their corresponding weights

both ship repair and shipbuilding resulted from a deep study carried out for the Indonesia Shipbuilding

Industry39 (see tables 6 – 7)

The factors and variables in both models are relatively the same. Their differences are related to the

nature and the market orientation (see figure 940). However, most of the dominant variables are intangible

resources.

Figure 9: External and Internal Factors for New Building and Ship Repair.

37 Ma'ruf, B., A systematic approach to strategy formulation for medium-sized shipyards 38 The dominant shiprepair business factors can be relativity different that those in shipbuilding business. 39 (Ma'ruf, et al, 2005a). 40 Ma'ruf, B. and others, “Pemodelan lingkungan bisnis galangan kapalDengan menggunakan metode analisis

factor”

New Building

&

Ship repair

Internal

strategic Factors

Tangible Resources

Facilities, equipments, workforce, engineering, location, capacity,

special physical resources, financial, etc.

Intangible Resources / capabilities

Culture, employee know-how, network, delivery speed, price level,

quality assurance, environmental assurance.

External

strategic Factors

Industry environment

Supporting industry, materials, customers, competitors, sub-

contractor, outsourcing services, wage level, global barriers, etc.

National environment

Market, government, bank, infrastructure, national stability,

education and research institutions, …




D.1.3


Table 6: Internal Factors and weights for Ship Repair and Ship-Building as proposed by Ma'ruf for

the Indonesia Shipbuilding Industry41

No. Factor Weight

Ship Repair

Weight

Ship Building

Internal

FACTOR

1 Price level

Employee know-how

0.14

0.13

0.12

-

Price quotation

2 Company culture

Business network

Organization and management

0.14

0.13

-

0.13

0.11

0.12

Shipyard management

3 Delivery speed

Quality assurance

0.16

0.15

0.15

0.13

Product performance

4 Shipyard location 0.15 - Yard location

5 Engineering

Facility and equipments

-

-

0.12

0.12

Process technology

TOTAL 1.00 1.00

Table 7: External Factors and weights for Ship Repair and Ship-Building as proposed by Ma'ruf for

the Indonesia Shipbuilding Industry.

No. Factor Weight

Ship Repair

Weight

Ship Building

External

FACTOR

1 Price of materials

Quality of materials

Sub-contractor workers

Supplier know-how

0.15

0.14

0.14

-

0.10

0.10

-

0.09

Interim supply

2 Bank support

Government support to shipyard

Government support to shipping

0.15

0.14

0.14

0.10

0.12

0.11

Maritime policies

3 Domestic market

International market

0.14

-

0.10

0.10

Repair or Shipbuilding

order

4 Barrier in global market

Industry infrastructure

-

-

0.09

0.09

Global restrictions

TOTAL 1.00 1.00

In the study was found that, “process technology” and “global restrictions” are only significant in

shipbuilding. In the other hand, “yard location” is only relevant in ship repair. Based on weighting

contribution, “shipyard management” factor in shipbuilding and “price quotation” in ship repair are the

most dominant factors for sustainable competitive advantage. For the external, “interim supply” is the

most dominant factor for both businesses.42

41 Ma'ruf, et al, 2005a 42 Ma'ruf, B., A systematic approach to strategy formulation for medium-sized shipyards




D.1.3


5.2 Eco-REFITEC Environmental Model

Use of the models mentioned above for Eco-REFITEC purpose (retrofit) is possible by adjusting the

factors and weights, and addressing specific aspects of the retrofitting industry.

In practice, extensive refits or conversions differ significantly from routine ship repair and maintenance

because of the complex high value work, and the greater time required for the work to be carried out. In

these respects extensive refits have elements that are very similar to shipbuilding, and the sector could be

considered as a bridge between the more routine ship repair/maintenance sector and the dedicated

shipbuilding yards.

For the aforementioned reasons, the Eco-REFITEC Environmental model has been obtained merging the

two models presented in the previous section. Besides, since the environment analysis is the starting point

in any strategy formulation models, we used the answers to the Shipyard Questionnaire B “SWOT

survey” (see annex 5) to adjust a little more the model for the retrofitting sector including some additional

variables to be taken into account: in particular the environmental assurance of the shipyard (Internal

Factor) and the mayor relevance of environmental policy (External Factor).

The final environmental model proposed to be used for the Analysis of operation of Ship repair shipyard

performing retrofitting works is summarized in the tables 8 and 9 showed below.

Table 8: Eco-REFITEC: Internal Factors and Repair Ship weight

No. Factor

Weight Ship Repair

(Eco-REFITEC)

Internal

FACTOR

1 Price level 0.13 Price quotation

2 Employee know-how 0.07

3 Company culture 0.14 Shipyard

management

4 Business network 0.12

5 Organization and management 0.06

6 Delivery speed 0.16 Product

performance

7 Quality assurance

0.07

8 Environmental assurance 0.07

9 Shipyard location 0.08 Yard location

10 Engineering 0.06 Process technology

11 Facility and equipments 0.06

TOTAL 1.000




D.1.3


Table 9: Eco-REFITEC: External Factors and Repair Ship weight

No. Factor

Weight Ship Repair

(Eco-REFITEC)

External

FACTOR

1 Price/Quality of materials and equipment

supply 0.130

Interim supply

2

Availability of Sub-contractor workers with

appropriated skill 0.070

3 Supplier know-how 0.050

4 Availability of Bank support 0.140 Maritime policies

5 Government support to shipyard /Shipping 0.200

6 Mayor relevance of environmental Policy 0.120

7 Potential market 0.120 Repair order

8 Trends in the products' requirements

demanded by the new market 0.050

9 Barrier in a global and specialised market 0.040 Global restrictions:

Macro Economical

environment

10

Favourable market conjuncture (Economical

growth vs Financial/Economic Crisis,

Investment,…

0.040

11 Outsourcing offer (engineering, equipment,

complete package,…) 0.040

1.000

The model will be used to provide a quick overview for the European Industry. It let identify high level

threats and weaknesses to be faced by the European ship-repair industry when develop new skills to

carried out Eco-retrofit and the formulation of strategies for actions that can contribute to improve the

European ship repair industry competitiveness.

The Internal Factor can be used to determine shipyard Strength and Weakness and the External Factor to

determine Opportunities and Threats.

Strategies of ship repair yards will be outlined accordingly with the position in the SWOT quadrant

obtained by simply plotting the average score of each internal and external factor.




D.1.3


6 Factor Evaluations from the European Ship repair Shipyards on

retrofitting work.

The complexity of the refitting processes to be carried out in the shipyards will be a challenge in terms of

organizational management for efficient and cost effective execution of the projects and also in terms of

minimizing the subsequent environmental impact as a whole.

It has been already mentioned that concerns regarding environmental impact of waterborne activities

increased significantly over the past few years resulting in new environmental regulations to be satisfied

by the Industry. The consequences of these new regulations may represent major business opportunities

for repair shipyards but can also affect repair shipyards in an adverse way.

It should be noted, though, that even regulations that have the potential to have a positive influence in the

outcomes can, in some situations, pose a threat for shipyards. In fact, some of these regulations will

require substantial modifications in current repair shipyards production organization that will increase

operating costs or require additional investments.

To help shipyards to identify high risk areas, a SWOT survey was generated and circulated among the

participating project members for their inputs (see annex 5 - Shipyard Questionnaire-Part B).

The information gathered from the shipyards and the organisations participating in the Eco-REFITEC

project was analysed and classified by dominant factors and External and Internal variables let us to attain

the average values that will be presented below.

Every variable within a factor has been finally rating by using scale of 1 to 4 depending on the factor

type; wear or strong, as adopted from the David‟s model (David 2003). (This scale is not the scale used in

the questionnaire but the answers has been scaled to easy the use of strategic standards models).




D.1.3


6.1 Internal Factor Evaluation: Evaluation of Strengths and Weakness.

In table 10 below is presented the evaluation matrix of internal factors which characterize the European

Ship Repair industry as results or the analysis carried out.

As it has been highlighted before, every variable within a factor has been rating by using scale of 1 to 4

depending on the factor type: weak or strong. N = 1 for very weak factor, N = 2 for weak factors, N = 3

for strong factor and N = 4 for very strong factor.

The values presented are the average ones resulting of all the answers received after classify them by

dominant factors.

Table 10: Eco-REFITEC. Evaluation matrix of internal factors which characterize the European Ship

Repair industry

FACTOR Variable S/W Weight Rating

Weighted

Score

1 Price Quotation Price level W 0.13 2 0.3

2 Price Quotation Employee know-how S 0.07 3 0.2

3 Shipyard Management Company culture S 0.14 3 0.4

4 Shipyard Management Business network S 0.12 3 0.4

5 Shipyard Management Organization and management S 0.06 3 0.2

6 Product Performance Delivery speed S 0.16 3 0.5

7 Product Performance Quality assurance S 0.07 3 0.2

8 Product Performance Environmental assurance W 0.07 2 0.1

9 Yard Location Shipyard location W 0.08 2 0.2

10 Process Technology Engineering S 0.06 3 0.2

11 Process Technology Facility and equipments S 0.06 3 0.2

1.00

2.73

The Total weighted scores obtained for the internal factor evaluation matrix is 2.73. That means that the

European Ship Repair industry on developing retrofitting of existing vessels are above the average in

formulating strategies that capitalise on their strength minimise their weaknesses.

This result will be analysed in the following sections, but must be understood that it is the average value

of the answer received to the SWOT survey questionnaire. As we see later, every country within Europe

could have a very different picture.




D.1.3


The graphic representation of the results of the above Internal evaluation matrix are shown in Figure 10,

where the global results per every internal Factor can be identified. Those results which get a % higher

than 50% are strength and the other weakness.

In this case for the European Repair sector the figure shows that the Process Technology, the Shipyard

Management and the Product performance are strength while the price quotation and the yard location are

considered a weakness.

Figure 10: Graphic representation of the Internal evaluation matrix‟s results for the

EU repair Shipyards.

44%

67%

59%33%

67%

Price quotation

(Max: 078)

Shipyard

management

(Max: 1.26)

Product

performance

Max(1.18)

Yard location

(Max: 0.30)

Process

technology

(Max: 0.48)

Ship Retrofitting SubModel

(Internal Factors S & W)

EU Repair Shipyards




D.1.3


6.2 External Factor Evaluation: Evaluation of Opportunities and Threats.

In table 11 below is presented the evaluation matrix of external factors which characterize the European

Ship Repair industry as results or the analysis carried out. Here again the values presented are the average

ones resulting of all the answers received after having classified them by dominant factors.

In this case N = 1 for major dangerous factors, N = 2 for medium influence factor (threats), N = 3 for

factor whose answer for ship-repair industry is over average (opportunities) and N = 4 for very high

opportunities.

Table 11: Eco-REFITEC. Evaluation matrix of External factors which characterize the European Ship

Repair industry

FACTOR Variable T/O Weight

Rating

N

Weighted

Score

1 Interim supply Price/Quality of materials and

equipment supply T 0.13 2 0.3

2 Interim supply Availability of Sub-contractor

workers with appropriated skill T 0.07 2 0.1

3 Interim supply Supplier know-how O 0.05 3 0.2

4 Maritime policies Availability of Bank support T 0.14 1 0.1

5 Maritime policies Government support to shipyard

/Shipping O 0.20 3 0.6

6 Maritime policies Mayor relevance of environmental

Policy T 0.12 2 0.2

7 Repair order Potential market O 0.12 3 0.4

8 Repair order Trends in the products' requirements

demanded by the new market O 0.05 3 0.2

9 Global restrictions Barrier in a global and specialised

market O 0.04 3 0.1

10 Global restrictions Favourable market conjuncture

(Economical growth vs

Financial/Economic Crisis,

Investment,…

O 0.04 3 0.1

11 Global restrictions Outsourcing offer (engineering,

equipment, complete package,…) O 0.04 3 0.1

1.00

2.40

The Total weighted scores obtained for the External factor evaluation matrix is 2.40. This means that it is

managing these threats and opportunities just below the 2.5 average. This result will be analysed in the

following sections.




D.1.3


The graphic representation of the results of the above External evaluation matrix are shown in Figure 11.

In it can be identify the global results per every External Factor. Those results which get a % higher than

50% are strength and the other weakness.

In this case, for the European Repair sector, the figure shows that the Global restrictions (Favourable

market conjuncture) and the repair order are opportunities while the Maritime Policies and Interim supply

are considered Threats.

Figure 11: Graphic representation of the External evaluation matrix‟s results for the

EU repair Shipyards.

40%

38%

67%

67%

Interim supply

(Max: 1.00)

Maritime policies

(Max: 1.84)

Repair order

(Max: 0.68)

Global restrictions

(Max: 0.48)


(External Factors O & T)

EU Repair Shipyards




D.1.3


6.3 SWOT Matrix

SWOT Matrix for the European Ship Repair sector must focuses on matching the European strength to

maximising external opportunities while simultaneously minimizing external threats.

Based on the internal strength/weaknesses and external opportunities/Threats position of European Ship-

repair Industry on retrofitting, forward integration, market penetration, and product development

strategies should be applied.

Table 12: SWOT matrix which characterize the European Ship Repair industry

Strengths Weakness

Employee know-how (1)

Company culture

Business network

Organization and management

Delivery speed

Quality assurance

Engineering

Facility and equipments

Price level (2)

Environmental assurance

Shipyard location (3)

Opportunities Threats

Supplier know-how

Government support to shipyard /Shipping

Potential market

Trends in the products' requirements demanded

by the new market

Barrier in a global and specialized market

Favorable market conjuncture (6)

Outsourcing offer (engineering, equipment,

complete package,…)

Price/Quality of materials and equipment

supply (4)

Availability of Sub-contractor workers with

appropriated skill (5)

Availability of Bank support

Mayor relevance of environmental Policy

(1) Knowledge, R&D and innovation are of strategic importance for the competitive position of the EU

shipbuilding sector. As the EU shipbuilding sector is increasingly specialising into the high knowledge-and

technology-intensive niches, knowledge is becoming an ever more important input in its value chain.43

(2) Europe has the highest wage levels, which directly affects the cost, levels of the industry. Strong competition

is felt, especially from the region of Tuzla in Turkey. Labour costs are still substantially lower in the new EU

members Romania and Bulgaria too.

(3) Most of the yards have stated their geographical location as one of the weaknesses. Further clarification has

revealed that the yard location is not close to the trading routes of the commercial vessels and hence the

vessels need to be diverted in order to reach yard facilities adding cost to the owners.

(4) These results don’t surprise because a part of a general answer received by SMRC Group, we have only

collected answer from the following Countries: Bulgaria, Lithuania, Romania, Spain and Poland.

(5) The whole maritime cluster (shipping operations, ship management) is moving gradually towards Asia. That

means a threat for European Shipyards. A careful planning is needed to maintain a critical mass of the

excellent supply chain, including its labour force in order to respond to the future demand.

(6) Although due to market developments the absolute demand for shipbuilding labour is not expected to show

strong increases, there is an ongoing demand for highly skilled labour. This is further aggravated by the

ageing population leading to the retirement of current skilled employees in the coming two decades.

43 ENTR/06/05. The Study on Competitiveness of the European Shipbuilding Industry. Within the Framework




D.1.3


(7) The financial/economic crisis itself is a threat to the industry but however the shipyards expect a Economical

growth and a favourable market conjuncture in a near future. There are additional growth prospects

arising from regulatory requirements on ship emissions and safety. There will be a lot of testing of new

concepts, which is good for smaller, flexible yards. There will be a lot of retrofitting, good business for the

producers of respective systems and for repair and conversion shipyards.

6.4 Internal – External (IE Matrix)

The Total weighted scores obtained for the Internal and External factor evaluation matrixes are plotted in

the table below, known as IE Matrix. (David 2003). This matrix consists of nine quadrants. Each one has

some meaning associated which suggests strategies.

The European Ship Repair Industry on developing retrofitting of existing vessels is in cell V (blue point).

This means that the sector should follow Hold and Maintain strategy. In other worlds the following

strategies are suggested within the sector: Market Penetration, Product development, Backward

Integration or/and Horizontal Integration.44

Figure 12: IE matrix which characterize the European Ship Repair industry

44 The types of strategies and definitions are included in annex 2.

1.00

2.00

3.00

4.00

1.002.003.004.00The EFE total

Weighted Score

(External)

High

3.0 to 4.0

Medium

2.0 to 2.99

Low

1.0 to 1.99

The IFE scores (Internal)Strong Average Weak

3.0 to 4.0 2.0 to 2.99 1 to 1.99

IIKuadran (Cells):

I,II,IV :Grow and build

III,V, VII: Hold and Maintain

VI, VIII, IX: Hervest or Divest

I

IV

VII

VI

VIII IX

V

III




D.1.3


6.5 Regional Analysis

Following with the SWOT analysis, in this subsection are presented the final results obtained for the

answer to the questionnaire received from different countries:

6.5.1 Spanish Medium Size Repair Shipyards


Spanish Medium sized Shipyards.


Spanish Medium sized Shipyards.

40%

46%

76%

56%

Interim supply

(Max: 1.00)

Maritime policies

(Max: 1.84)

Repair order

(Max: 0.68)

Global restrictions

(Max: 0.48)



Spanish Medium Sized Repair Shipyards

44%

67%

75%

33%

67%

Price quotation

(Max: 078)

Shipyard

management

(Max: 1.26)

Product

performance

Max(1.18)

Yard location

(Max: 0.30)

Process

technology

(Max: 0.48)



Spanish Medium Sized Repair Shipyards




D.1.3


6.5.2 Polish Repair Shipyards


Polish Repair Shipyards.


Polish Repair Shipyards.

33%

33%

33%

67%

Interim supply

(Max: 1.00)

Maritime policies

(Max: 1.84)

Repair order

(Max: 0.68)

Global restrictions

(Max: 0.48)



POLISH Repair Shipyard

22%

46%

41%33%

50%

Price quotation

(Max: 078)

Shipyard

management

(Max: 1.26)

Product

performance

Max(1.18)

Yard location

(Max: 0.30)

Process

technology

(Max: 0.48)



POLISH Repair Shipyard




D.1.3


6.5.3 Romanian Repair Shipyards


Romanian Repair Shipyards.


Romanian Repair Shipyards.

40%

42%

33%

67%

Interim supply

(Max: 1.00)

Maritime policies

(Max: 1.84)

Repair order

(Max: 0.68)

Global restrictions

(Max: 0.48)



ROMANIAN Repair Shipyard

67%

67%

49%33%

67%

Price quotation

(Max: 078)

Shipyard

management

(Max: 1.26)

Product

performance

Max(1.18)

Yard location

(Max: 0.30)

Process

technology

(Max: 0.48)



ROMANIAN Repair Shipyard




D.1.3


6.5.4 Bulgarian Repair Shipyards


Bulgarian Repair Shipyards.


Bulgarian Repair Shipyards.

33%

38%

57%

56%

Interim supply

(Max: 1.00)

Maritime policies

(Max: 1.84)

Repair order

(Max: 0.68)

Global restrictions

(Max: 0.48)



BULGARIAN Repair Shipyard

67%

54%

51%

67%

67%

Price quotation

(Max: 078)

Shipyard

management

(Max: 1.26)

Product

performance

Max(1.18)

Yard location

(Max: 0.30)

Process

technology

(Max: 0.48)



BULGARIAN Repair Shipyard




D.1.3


6.5.5 SMCR Repair Shipyards45


SMRC Repair Shipyards.


SMRC Repair Shipyards.

45SMCR yards are those belonging to the Ship Maintenance, Repair and Conversion Group of CESA

33%

33%

67%

56%

Interim supply

(Max: 1.00)

Maritime policies

(Max: 1.84)

Repair order

(Max: 0.68)

Global restrictions

(Max: 0.48)



SMRC

67%

67%

49%

67%

50%

Price quotation

(Max: 078)

Shipyard

management

(Max: 1.26)

Product

performance

Max(1.18)

Yard location

(Max: 0.30)

Process

technology

(Max: 0.48)



SMRC




D.1.3


7 Risk Assessment for Shipyards performing retrofits

7.1 Introduction

Shipyards need to understand and define the project environment from a risk-management perspective,

which is assisted through the identification and analysis of sources of risk and their components.

Regardless the productive sector, changes in existing regulations or the entry in force of new ones have

always impact to some extent in the organizations that operate in the concerned sector.

If it is true that, regulatory changes can sometimes lead to benefits for the organizations, in other

situations they will imply the need for alterations in the production organization which are likely to

require additional investments and therefore increase costs for the organization.

As it has been already mentioned, due to the supranational nature of the shipping industry there is an

obvious need for international standards that are widely adopted and accepted among the sector. For this

reason waterborne activities are mainly regulated by the International Maritime Organization (IMO)

which was established in 1948 in Geneva.

Regulations developed by IMO take the form of Conventions which to entry in force need to be formally

accepted by individual governments. Since the technology and the techniques used in the shipping

industry are being developed in an ongoing basis, existing Conventions are subject to amendments in

order to ensure that they are kept tailored to the state of industry.

Concerns regarding environmental impact of waterborne activities increased significantly over the past

few years. Therefore, a considerable number of new regulations prepared by IMO are expected to entry in

force during the following years. Whilst some of these regulations will represent major business

opportunities for repair shipyards others can affect repair shipyards in an adverse way.

It should be noted, though, that even regulations that have the potential to have a positive influence in the

outcomes can, in some situations, pose a threat for shipyards. In fact, some of these regulations will

require substantial modifications in current repair shipyards production organization that will increase

operating costs or require additional investments.

7.2 Relevant Regulations

Before advance in risk criteria definition a short description of the forthcoming regulations that are of

relevance for shipyards is going to be provided46, together with a brief analysis of the consequences that

those regulations may bring for repair shipyards.

7.2.1 Ballast Water Management Convention

The Ballast Water Management Convention addresses the problem of the transference of maritime

invasive species between different maritime areas due to the discharge of ballast water carried by vessels.

Despite had been adopted in 2004 this convention is not yet in force. However, according to Lloyd‟s

Register the entry in force of this convention will probably occur in 2012.

46 Eco-REFITEC deliverable D.1.1 analyses in details the new forthcoming regulations adopted by IMO




D.1.3


The ultimate consequence of this convention is the need for the implementation of ballast water treatment

systems onboard the majority of the ships carrying ballast water which are involved in international

trading. The convention also specifies that the treatment systems need to be approved by the flag

administration or by a recognized organization. The impact of this convention in the ship repair industry

will be very significant, for the number of ships that will need retrofitting amounts to 65.000 according to

Lloyd‟s Register.

Potential threats for repair shipyards that can arise from the implementation of this convention include:

- Increasing concerns regarding the health and safety of the workers due to handling and storage of

new chemicals;

- Increasing dependence on external equipment suppliers which can lead to more frequent budget

problems and schedule delays;

- Possible need for investments in new equipments or facilities;

- Possible need to hire additional manpower;

- Increased legislative requirements due to handling and storage of new chemical substances.

7.2.2 MARPOL – Annex VI – Prevention of air pollution from ships

Annex VI of MARPOL, which entered in force in 2010, aims at reducing air pollution originated by

ships, specifically: sulphur oxides (SOx) and nitrogen oxides emissions (NOx). In order to avoid undue

constraints for the shipping industry, the aforementioned annex establishes that emissions reduction can

be attained either by using alternative fuels or through the adoption of gas cleaning technologies. An

opportunity for repair shipyards is therefore created, since abatement technologies will need to be

installed onboard ships that integrate existing fleets.

Potential threats for repair shipyards performing the aforementioned eco-refitting task include:

- Increasing dependence on external equipment suppliers which can lead to more frequent budget

problems and schedule delays;

- Possible need for investments in new equipments or facilities;

- Possible need to hire additional manpower.

7.2.3 Ship Recycling Convention

Ship Recycling Convention, also known as Hong Kong Convention, has the purpose to ensure that risks

for the environment, health and safety are kept at an acceptable level during ship recycling operations.

To accomplish these objectives ships to be sent for recycling will be required to have an Inventory of

Hazardous Materials. This inventory shall include a record of all materials on the ship that are prone to be

hazardous to the health and the environment. Thereby ship-owners need to be fully informed about all the

materials that are used during maintenance and repair works.

The convention includes also an appendix with a list of materials that will be prohibited or restricted in

shipyards, ship repair yards and ships due to their hazardous characteristics.

The Ship Recycling Convention was adopted in 2009 and is expected to entry in force between 2013 and

2015 according to Lloyd‟s Register.




D.1.3


As regards repair shipyards the entry in force of the convention might have the following consequences:

- Increasing documentation requirements to allow a comprehensive knowledge about all the

materials that are used during maintenance and repair works and their characteristics;

- Need for the substitution of materials that are banned by the convention;

- Increase in investment and/or operating costs.

- Schedule delays due to the extra documentation requirements.

7.3 Risk Criteria

7.3.1 Risk Evaluation Matrix

The risk matrix is used to assign risk levels to each of the combinations of probability of occurrence and

consequence of events. The risk levels assigned in the table are effectively measured on a logarithmic

scale:

Risk = Probability * Consequence

log (Risk) = log Probability + log (Consequence)

The ALARP principle is utilised within the risk matrix in order to illustrate the boundary conditions for

the unacceptable, ALARP and acceptable area. The ALARP principle/philosophy is described in

background documents, e.g. MSC 72/16.

As was previously mentioned the establishment of evaluation criteria is a key step in every risk

assessment process. In this case a qualitative approach using a 5 x 5 matrix with 4 levels of risk has been

used (see fig 13).

In general, risk items defined to be in the red area (Risk index 9-10) are unacceptable and most be

reduced/eliminated. Risk items in the green area (risk index 2-4) are acceptable and no further actions are

required. Risk items in the yellow/orange area (risk index 5-8) should be evaluated based on a cost-

benefit approach. Figure 23 illustrates the risk matrix and the ALARP principle. Table 13 provide the

definition for each of the proposed risk levels

PI Probability

Consequence/Severity

1 2 3 4 5

Insignificant Minor Moderate Major Catastrophic

5 Almost certain 6 7 8 9 10

4 Likely 5 6 7 8 9

3 Moderate 4 5 6 7 8

2 Unlikely 3 4 5 6 7

1 Rare 2 3 4 5 6

Figure 23: Risk Matrix




D.1.3


7.3.2 Description of suggested Risk Levels

Table 13: Risk levels

Level of Risk Evaluation Criteria

Low Risk

(L)

Unlikely to threaten the normal operation of the shipyard and/or to affect

significantly the working conditions at the shipyard and/or the

environment.

Medium Risk

(M)

The financial security of shipyards may be affected;

An increase in the emissions for the environment may occur, however not

exceeding the threshold values specified by law;

An augment in the frequency of minor work accidents may occur.

High Risk

(H)

Likely to threaten the ongoing financial security of the shipyard;

Emissions for the environment may exceed occasionally the threshold

limits established in the legislation;

An increase of the occurrence of work accidents that require

hospitalization may occur.

Extreme Risk

(E)

Financial threat to the survival of the organization;

Detrimental effects for the surrounding environment;

Increase in the likelihood of occurrence of deadly work accidents.

7.4 Risk Identification

The Identification of current and potential risks affecting the European Eco Retrofitting programs in all

shipyards‟ areas of activity is one of the main objectives of this study.

The scope of this exercise has been to investigate the risk (“hazards”) that could be associated to the

operation of Ship Repair Shipyards in Europe when developing ship retrofitting, in particular in the Eco-

REFITEC participants countries. It should provide a representative selection of hazards giving a

background for further work.

The “Risk” identification focuses on the operation of the repair shipyards (mainly medium-sized which

seems to be dominant amongst the big new repair centres in European), thus “risk” related to the

retrofitted ship are not included in the scope. The participants in the “Risk” identification and assessment

have combined experience within overall ship repair sector in Europe.

Results of the “Risk” identification are reported upon.

7.4.1 Approach

A structured approach to identify “risk” has been utilized based on studying the various operational stages

and activities that are usually carried out in the repair shipyards as outlined in previous sections of this

report.

As risk sources, the threats and weaknesses of the European Ship repair yards, identified through specific

questionnaires sent to the partner‟s participants, have been taken into account.




D.1.3


7.5 Results

The results from the dedicated questionnaires are presented in this Section. The main findings are that no

separate Risk forms an immediate threat to the operation of Ship Repair sector when developing ship

retrofitting. However, summarising the various risk contributions may indicate that there are a number of

scenarios that should be further evaluated in future works.

The main hazards identified are ranked (based on their risk index) in Table 14. The ranking is based on

gathering the independent scores from the answers to the questionnaire and thereafter utilise the average

score in the risk register.

Table 14: Risk levels

No Hazard Risk

index Factor

1 Financial/economic crisis. 7 Commercial and legal

relationships

2 Own Skilled worked migration 7 Human resource issues

3 No Technology transfer among shipyards, ship owners, suppliers,

SSCC, administrations. 5 Commercial and legal

relationships

4 Classification societies approval of new eco-innovations (processes,

modules, structures,…) 5

5 To keep information on legal and other requirements up-to-date. 5 Regulatory

6 Environmental rules not equal every where 5

7 Competence of Facility personnel performing tasks that can cause

significant environmental impact. 5

Others

Human resource issues 8 Lack of availability of labour force and skill requirements. 5

9 Increment use of subcontractors “Outsourcing” to best deal with the

current high level demand 5

10

Proper integration of new processes, modules and activities into the

environmental effort that shipyards are developing for the rest of their

facility. Keep programs up-to-date.

5

Management activities

and controls

11 Proper quantification of Environmental Cost 5

12 Proper quantification of Environmental Savings 5

13 Proper Cost Allocation. 5

14 Availability of a Purchasing department with Knowledge of

procurement system – Knowledge of supply chain efforts. 5

15 Availability of Facilities Engineering: 5

16 Emission of hazardous material to the environment. 5

17 Transparency through publicity available policies and reporting of

indicators. 5

18 Technology Advancement of Pollution Prevention Tools (TCA). 5




D.1.3


The two main hazards in the risk register are the Financial/economic crisis and the Own Skilled worked

migration. These risks were already identified as Threats and Weakness in the SWOT survey, in

particular in those countries with lower labour costs.

Others sources of risks identified in the SWOT survey are ranked in Table 15. In this case the ranking is

based on the product “Probability * Consequence” as gathering from the answers to the questionnaire.

Table 15: Threats (T) and Weaknesses (W) as gathering from the SWOT survey which can results in

risks.

No W / T Hazard Risk

index Factor

1 T Financial / Economic Crisis 6,24 Competitive Market.

2 W Difficulties in getting financing 6,24 Finance, Marketing

3 T Delays in the delivery of providers information 4,24 Trends in equipment suppliers

4 W Level of standardization and normalization for

internal and subcontractors use 3,89 Technology - Production

5 T Bigger dependence on foreign specialized

engineering 3,71

Trends in external engineering

suppliers:

6 W Environment protection management. 3,33 Technology - Production

7 T Lack of responsibility for errors and delays 3,06 Trends in equipment suppliers

8 T Errors in the information provided by the

suppliers 2,76 Trends in equipment suppliers

9 T Availability / lack of loyal external resources,

with knowledge of shipyard practices 2,65

Trends in external engineering

suppliers:

10 T Lack of IPR protection 2,67 Competitive Market.

These results show again some of the aspects already indentified in the study. To be highlighted those

associated to the outsourcing of engineering activities and the supply of equipments.

Delays in the delivery of providers information

Level of standardization and normalization for internal and subcontractors use

Bigger dependence on foreign specialized engineering

Lack of responsibility of suppliers for errors and delays

Errors in the information provided by the suppliers

Availability / lack of loyal external resources, with knowledge of shipyard practices




D.1.3


8 Main Conclusions

The global economic slowdown and financial crisis have put the challenges to European‟s ship repair

industry. The challenges for European‟s ship-repair yards are primarily focused on: Fierce competition in

the world‟s ship-repair market. The competition might become even fiercer, which urges all local players

in the industry to optimize management and enhance technical innovation as to secure a safer position.

European ship repair companies must focus on several aspects of the business to gain or maintain their

competitive advantage in the shipbuilding industry, the more important ones are the technology

innovation and the efficiency, but also will be very important to improve the relation with the suppliers

(equipment and engineering), to solve the difficulties in getting finance and to implement an environment

protection management.

As European companies have been leaders in developing technology for many decades, Europe is far

ahead other countries in many key technologies, with domestic brands to provide support products for

retrofitted ship. Most key components can be manufactured in Europe at the present time. The country‟s

capacity to provide the products with high added-value ship is an important advantage for the Sector that

must be kept.

In the ship-repair process, many working procedures are polluting if proper preventing measures are not

in place. The controlling and diminishing of waste, which is dust and sound, require expensive

appliances. The costs to reduce pollution absolutely go to the accounts of the shipyards. Such additional

expenses are unavoidable in European countries but not in others.

One way that European ship repair centres achieve their competitive advantage is improving their

efficiency by getting better production process and human resources. It is needed:

Decreased ship repair time and raised production efficiency. Technology simplifies the complex

production process, it reduces ship construction time and cost. European ship repair yards, in

particular the smalls ones, should makes an effort to use the modern production technologies.

Technology transfer among the European shipyards should help in this purpose.

Optimum Utilisation of Existing Facilities. Optimum utilisation of European existing facilities

can only take place if there is adequate investment in improvement in the basic infrastructure and

facilities. This is possible by modernisation of blasting and cleaning procedures, painting, steel

replacement etc.

More management control of foreign specialized engineering and outsourcing activities.

Human Resources development. Human resource development system needs to be upgraded in

order to improve the efficiency and become also a source of European competitive advantage.

European has skilled ship repairs workers and must keep their expertise, preventing high-tech

professional‟s migration and retirement before time and stimulating the knowledge dissemination

to the new generations of Ship repair European workers.




D.1.3


The challenges and the issues faced by the shipyards have been very well stated in the answered

questionnaires. From the data available, some shipyards have shown a need to have some organisational

changes for better performance and improvement in the existing structures. Also some yards have plans to

make investments for acquiring new equipment and other software tools in order to enhance their

performance and meet future competitiveness and demands.

Following the review of the answers available to the supplied questionnaires and the inferences drawn

from the available information the conclusions that can be drawn are:

The greening of the fleet is a challenge for the shipping industry which needs to be addressed by

the shipyards by carrying out retrofits on the ships but the scope of the new work anticipated

would call for some organisational changes and adoption of new methodologies for project

execution.

A shipyard is a complex organisation and the projects vary from one another considerably

especially the ones involving the repair and retrofitting of existing vessel. The scope of the work

being carried out in the repair yards is so wide and diverse that it is not easy to mark the

deficiencies looking at the overall picture being provided in the questionnaires. A better

assessment of the risks involved for the shipyards dealing with the retrofitting projects can be

achieved by assessing the shipyard organisational performance addressed to a specific project.

Specifically assigned case studies dealing with particular type of vessels and specific retrofitting

needs of that vessels can provide a better insight of the shipyard performance. The facilities and

the equipment available within the yards may seem to be satisfactory and enough to deal with the

current projects but the need of additional requirements and equipment upgrade can also be better

understood by the scope of work to be carried out in the projects dealing with the specific case

studies.

For the projects involving the ship repair and retrofitting jobs major challenge is the unforeseen

work load involved in the ship repair projects. This affects the overall planning and resource

allocations and can result in undue delays to the project. The exchange of the information

between the owner (vessel) and the shipyard prior to the vessel‟s arrival at the yard is very

important for better project assessment and planning.




D.1.3


Annexes

A.1 Annex 1: List of References

[1] “DNV makes safety pledge on single hull conversions” – Lloyds´s List 14/11/07

[2] CARE Research (2008). Report on The Shipbuilding Industry. December 2008.

[3] CESA (2011):. Annual Report 2010-2011.

[4] Clarkson (2009). Shipyard Order book Monitor. Volume 16, No. 1. January 2009.

[5] David, F.R. (2003), Strategic Management, Concepts and Cases, 9 Edition, Prentice-Hall, New

Jersey.

[6] ECSA (2010): Annual Report 2010-2011

[7] ENTR/06/05. The Study on Competitiveness of the European Shipbuilding Industry. Within the

Framework Contract of Sectoral Competitiveness Studies – Ecorys research and consulting.

[8] Gasparotti C. The internal and external environment analysis of Romanian Naval Industry with

SWOT Model. Management & Markeing (2009) Vol.4, N0.3, pp 97-110.

[9] Ma'ruf, B., A systematic approach to strategy formulation for medium-sized shipyards

[10] Ma'ruf, B., Suwignjo, P. and Widjaja, S. (2005a), ”Pengembangan model lingkungan bisnis untuk

industri kapal nasional”, Jurnal Manajemen Teknologi, Vol.4, No.1, pp.63-71.

[11] Ma'ruf, B., Widjaja, S. and Suwignjo, P. (2005b), “Analisis pengaruh faktor dominan dalam

menunjang daya saing berkelanjutan bagi industri kapal nasional”, Jurnal Penelitian Engineering,

UNHAS, Vol.11, No.2, pp.155-166.

[12] National Bureau of Statistics China (2008). Various statistics. Available at www.stats.gov.cn

[13] OECD (1994). Agreement respecting normal competitive conditions in the commercial

shipbuilding and repair industry.

[14] OCDE (2008). The interaction between the ship repair, ship conversion and shipbuilding

industry.

[15] OECD (2009). Various statistics, available at http://stats.oecd.org/index.aspx

[16] Porter, M.E. (1985), Competitive Advantage: Creating and Sustaining Superior Performance, The

Free Press, New York.

[17] PPFAS (2008). India Shipbuilding Industry. 7th March 2008.

[18] Report of the “Working Group for Indian Shipbuilding and Ship Repair Industry for the Eleventh

Five Year Plan (2007-2012)” by the Government of India.

[19] Research Report on Chinese Ship Repair Industry, 2010-2011

[20] SHIPMATES – Deliverable 1.3. Maritime Database of key areas with high impact on

environmental and repair costs.

[21] SHIPMATES – Final Activity Map. (Deliverable 1.2)

[22] Study on Competitiveness of the European Shipbuilding Industry. Within the Framework

Contract of Sectoral Competitiveness Studies – ENTR/06/054

[23] The Interaction between the ship repair, ship conversion and shipbuilding industries report”,

C/WP6(2008)6

[24] The Shipbuilding Framework (2003/C 317/06) entered into force on 1 January 2004, and was

recently prolonged for the second time until December 2011.

[25] UNCTAD. Review of Maritime Transport 2010.




D.1.3


A.2 Annex 2: Abbreviations and Definitions

Table 16: Abbreviations and Definitions of Key Terms

Abb. Term

CESA Community of European Shipyards‟Association

EAA European Economic Area, including EU, Iceland, Liechtenstein and Norway

ECSA European Community Shipowners‟ Associations

EU European Union

DWT Deadweight, a measurement of the carrying capacity of a ship

GT Gross Tonnage, a measurement of the physical size of a ship

IMO International Maritime Organisation

mln Abbreviation of million

Risk Risk is the potential for realization of unwanted negative consequences of an

event.

Risk analysis Systematic process to understand the nature of and to deduce the level of risk.

Risk evaluation Process of comparing the level of risk against risk criteria.

Risk

identification The process of determining what, where, when, why and how something could

happen.

Stakeholders Those people and organisations who may affect, be affected by, or perceive

themselves to be affected by a decision, activity or risk.

SMCR Ship Maintenance, Repair and Conversion shipyard Group of CESA

SWOT Abbreviation of Strength, Weaknesses, Opportunities and Threats

Threats Factors and events occurring in the macro and micro environment that create

unfavourable conditions for the appropriated execution of ship retrofitting by

European repair shipyards

UN United Nations

UNFCCC UN Framework Convention on Climate Change

Weaknesses All those aspects of the functioning of the European ship repairing sector in the

fields of marketing, finance, human resources, technology and manufacture, as

well as in the organisation and management, that limit its efficiency or impede its

development.

WTO World Trade Organisation




D.1.3


A.3 Annex 3: Grand Strategies definitions

Table 17: Grand Strategies definitions

Term Definition

1 MARKET

PENETRATION

Market penetration occurs when a company enters/penetrates a market

with current products. The best way to achieve this is by gaining

competitors' customers (part of their market share). Other ways include

attracting non-users of your product or convincing current clients to use

more of your product/service (by advertising etc.).

Market penetration occurs when the product and market already exists.

2 MARKET

DEVELOPMENT

Expansion of the total market for a product or company by

(1) entering new segments of the market,

(2) converting nonusers into users, and/or

(3) increasing usage per user.

3 PRODUCT

DEVELOPMENT

In business and engineering, new product development (NPD) is the

term used to describe the complete process of bringing a new product

to market.

A product is a set of benefits offered for exchange and can be tangible

(that is, something physical you can touch) or intangible (like a service,

experience, or belief). There are two parallel paths involved in the NPD

process: one involves the idea generation, product design and detail

engineering; the other involves market research and marketing analysis.

Companies typically see new product development as the first stage in

generating and commercializing new products within the overall

strategic process of product life cycle management used to maintain or

grow their market share.

4 FORWARD

INTEGRATION

A business strategy whereby activities are expanded to include control

of the direct distribution of its products.

A ship building company that expands into ship maintenance would be

an example of. A company such as this is often referred to as vertically

integrated.

5 BACKWARD

INTEGRATION

When a company expands its business into areas that are at different

points of the same production path. A form of integration that involves

the purchase of suppliers in order to reduce dependency.

A example would be if a ship repair company bought a equipment

supply factory in order to reduce the risk associated with the

dependency on this equipment.




D.1.3



Term Definition

6 HORIZONTAL

INTEGRATION

When a company expands its business into different products that are

similar to current lines.

A cruise vessel repair shipyards expanding into repair LNG carriers

would be an an example of horizontal integration. Compare this to

vertical integration

7 JOINT VENTURE

A joint venture is a business agreement in which parties agree to

develop, for a finite time, a new entity and new assets by contributing

equity. They exercise control over the enterprise and consequently

share revenues, expenses and assets. There are other types of

companies such as JV limited by guarantee, joint ventures limited by

guarantee with partners holding shares.

8 CONCENTRIC

DIVERSIFICATION

This means that there is a technological similarity between the

industries, which means that the firm is able to leverage its technical

know-how to gain some advantage. For example, a company that

manufactures industrial adhesives might decide to diversify into

adhesives to be sold via retailers. The technology would be the same

but the marketing effort would need to change.

It also seems to increase its market share to launch a new product that

helps the particular company to earn profit.

The company could seek new products that have technological or

marketing synergies with existing product lines appealing to a new

group of customers. This also helps the company to tap that part of the

market which remains untapped, and which presents an opportunity to

earn profits.

9 HORIZONTAL

DIVERSIFICATION

The company adds new products or services that are often

technologically or commercially unrelated to current products but that

may appeal to current customers. In a competitive environment, this

form of diversification is desirable if the present customers are loyal to

the current products and if the new products have a good quality and

are well promoted and priced. Moreover, the new products are

marketed to the same economic environment as the existing products,

which may lead to rigidity and instability. In other words, this strategy

tends to increase the firm's dependence on certain market segments. For

example, a company that was making notebooks earlier may also enter

the pen market with its new product.




D.1.3



Term Definition

10 CONGLOMERATE

DIVERSIFICATION

The company markets new products or services that have no

technological or commercial synergies with current products but that

may appeal to new groups of customers. The conglomerate

diversification has very little relationship with the firm's current

business. Therefore, the main reasons of adopting such a strategy are

first to improve the profitability and the flexibility of the company, and

second to get a better reception in capital markets as the company gets

bigger. Even if this strategy is very risky, it could also, if successful,

provide increased growth and profitability.

11 MERGER A merger takes place when two companies combine their operations,

creating in effect, a third company. An acquisition is a situation in

which one company buys, and controls another company.

Horizontal mergers or acquisitions are the combining of two or

more organizations that are direct competitors.

Concentric merges or acquisitions are the combining of two or

more organizations that have similar products or services in

terms of technology, product line, distribution channels, or

customer base.

Vertical merges or acquisitions are the combining of two or

more organizations to extend an organization into either

supplying products or services required in producing its present

products or services or into distributing or selling its own

product and services.

Conglomerate mergers or acquisitions involve the combining

of two or more organizations that are producing products or

services that are significantly different from each other.

12 RETRENCHMENT

STRATEGY

A strategy used by corporations to reduce the diversity or the overall

size of the operations of the company. This strategy is often used in

order to cut expenses with the goal of becoming a more financial stable

business. Typically the strategy involves withdrawing from certain

markets or the discontinuation of selling certain products or service in

order to make a beneficial turnaround.

13 DIVESTITURE

Selling of, or otherwise disposal of, a firm's assets to achieve a desired

objective, such as greater liquidity or reduced debt burden. In

accounting, divestiture transactions are recorded as a one time, non-

recurring gain or loss.

14 LIQUIDATION

Winding up of a firm by selling off its free (un-pledged) assets to

convert them into cash to pay the firm's unsecured creditors. (The

secured creditors take control of the respective pledged assets on

obtaining foreclosure orders). Any remaining amount is distributed

among the shareholders in proportion to their shareholdings.

Liquidation process is initiated either by the shareholders (voluntary

liquidation) or by the creditors after obtaining court's permission

(compulsory liquidation).

Source: Wikipedia.




D.1.3


A.4 Annex 4- Shipyard Questionnaire – Part A

THE INFORMATION YOU DISCLOSE WILL BE TREATED AS

CONFIDENTIAL. THE RESULTS OF THE QUESTIONNAIRE WILL NOT

IDENTIFY INDIVIDUAL COMPANIES.

1. STRATEGY MARKET.

1.1. Long term Plans (Planning)

1. What category would you like to classify your yard in terms of the primary business/activities

carried out?

New-building yard

Ship-repair yard

New-building & ship-repair yard

Others ( Please explain)

- …

2. Is the yard capable of undertake major retrofit and conversion projects

on existing vessels

Yes NO

At present.

No so far. There are plans to do it in a near future

3. What are your key strengths and weaknesses?. STRENGTH WEAKNESS

Reputation

Available equipment,

yard location

management structure,

Others ( Please explain)

1.2. Product Development (Design)

4. What is the yard capacity in terms of Engineering and Product

development?

YES NO

Null, it is not necessary for the basic repairs addressed

The design work is subcontracted when needed.

The design work is made by the shipyard




D.1.3


1.3. Facility Plans (Production)

5. What is the yard capacity in terms of the size of the vessels/ships

catered?

Yes NO

Large vessels (LOA > 200m)

Medium sized vessels (200m > LOA > 100m)

Small sized vessels (LOA <100m)

**You can also classify in terms of the DWT of the vessels catered.

6. Please provide the capacity and details of the construction facilities available and the crane

capacities.

Please provide quay side and berthing information as well.

Sr. No. Dock/Berth/Quay Length (m) Width (m) Depth * (m)

Cranes

(No. x

Tons)

Crane

Span (m)

1.

2.

3.

4.

*Depth may not be applicable in quay and berth sections

7. Please provide a brief description of the various workshops, their equipment and facilities.

*It would be helpful if you could attach the Shipyard Brochure as well.




D.1.3


8. Are there any specific equipment installed or commissioned by the

contractors at the yard site other than the facilities provided by the yard?

Yes NO

Specialised Welding equipment

Chemical cleaning

Others (Please Specify)

Specify equipment whose use generates some sort of waste or emissions which are subject to

regulations and may require treatment.

9. Please provide the site plan layout of the yard.

10. Describe briefly the challenges/issues in the “PRODUCTION” Project stage (Design, Materials,

Resources, Shop Work; Ship Work)

11. What are the external factors affecting the “PRODUCTION” inside the yard, e.g. suppliers, sub-

contractors etc. Please explain briefly.

12. Describe briefly the challenges/issues in the “DELIVERY” Project stage




D.1.3


13. Any comments and suggestions that are not covered by the questions given above reflecting the

structure of your shipyard as a production organisation are welcome and would be considered as a

great contribution towards this task.

1.4. Long Term Strategy (Production Engineering)

14. Types of vessels/ships are catered to at the yard? Yes NO

Commercial cargo vessels

Commercial passenger vessels

Defence/Combat service vessels

Special purpose vessels (Offshore vessels, fast crafts, dredgers etc.)

Others (Please Specify)

15. Are there any changes in the yard facilities etc. under consideration or to

be implemented in near future?

Yes

NO

If yes, explain briefly.

16. Are there any process/equipment calling for an upgrade, replacement

with new ones, phase out etc. for increasing the yard performance and

necessary under the present circumstances?

Yes NO

Xxx

Xxxx

Xxxx (Please Specify)

Describe briefly.




D.1.3


1.5 ENVIRONMENTAL management

17. Please provide a list of waste generated in the yard activities in a tabulated form as given below.

(First row as an example).

S. No. Type of

Waste

Hazardous /

Non-

Hazardous

Originating

From ship/yard

act

Onsite/Offsite

(3rd

Party)

Treatment

Description &

Comments

E.g. Sludge Hazardous Ship/Vessel Onsite Shipyard Sludge

treatment plant

1.

2.

3.

4.

5.

18. Reception facilities available at the yard for the wastes emanating from the ships.

Storage facilities prior to treatment/disposal etc.

19. What sort of waste treatment and recycling equipment/infrastructure is available at the yard?

E.g. sludge treatment plant, grit recycling plant etc.

20. Please provide us with the typical waste flow sequence inside the yard. It would be appreciated if,

at-least one example each, of wastes treated both onsite and off-site be provided.




D.1.3


21. How is the initial assignment of costs?

1

Always to

overhead

2

Usually to

overhead

3

Usually to

product/

process

4

Always to

product/

process

On-site air/wastewater/hazardous

waste testing and monitoring

On-site air emission controls

On-site wastewater pre-treatment

/treatment /treatment /disposal

On-site haz. Waste pre-treatment

/treatment/disposal

On-site hazardous waste handling

(e.g.storage, labelling)

Manifesting for off-site hazardous

waste transport

Off-site hazardous waste transport

Off-site wastewater/haz. waste pre-

treatment/ treatment

Energy costs

Water costs

Licensing / permitting

Reposting to government agencies

Environmental penalties/fines

Staff training for environmental

compliance

Environmental staff labour time

Legal staff labour time




D.1.3


1.6 Market Strategy (Commercial)

22. Describe briefly the challenges/issues in the “enquiry” Project stage

1.7. Human Resources Strategy (Human Resources)

23. Please provide a list of all the departments within the shipyard.

24. Describe the issues, if any, in the availability of skilled workforce for specialised jobs at the yard

during varying workload situations.

25. Please provide us with a detailed (if possible) organisational/management structure of your yard.




D.1.3


26. Are there any changes in the management structure and yard facilities

etc. under consideration or to be implemented in near future?

Yes

NO

If yes, explain briefly.

27. What are the training and development approach/policy adopted for the yard personnel?

28. What are the key issues in terms of the yard personnel training and development?




D.1.3


A.5 Annex 5- Shipyard SWOT survey and Shipyard Questionnaire – Part B

SWOT Survey




Please complete the following questions taking into account the below analysis criteria:

The analysis of internal and external factors will be made identifying, selecting and evaluating the

possibility and importance to the objective pursued.

Selected technological, economic and environmental aspects will be first identified as Strengths,

Weaknesses, Opportunities and Threats accordingly with shipyards position and noted with an “S”, “W”,

“O”, or “T” as corresponding.

Then this aspect will be evaluated by assigning a probability and importance coefficients on the basis of

the following scales.

Probability Criterion

Value 3 Surely

Value 2 quite possibly

Value 1 may

Value 0 Rarely

Criteria for Importance (Strengths) or significance (such as weakness)

Value 3 High Importance

Value 2 Serious enough

Value 1 Possible Importance

Value 0 Relevance negligible




D.1.3


1.1. OPPORTUNITIES (O) AND THREATS (T) (External factors)

1.1.1. Competitive Market.

Scope / description O / T Probability Importance

1. Economical growth

2. Specialized ship repair demand

3. Geographical position

4. Lack of an uniform Level playing field

5. R&D and innovation investment

6. Environmental requirements

7. Lack of IPR protection

8. EU Government support

9. National Government support (subsidies)

10. Financial / Economic Crisis

11. Concentration of repair shipyards

12. Shipyards cooperation

1.1.2. Trends in the products demanded by the market:


13. Demand of more technological and innovative

products

14. Demand of Tailor made Products

15. Stable demand for certain types of "standard vessel"

16. Reduction of the lead time required in the repair,

maintenance and retrofit of ships.

17. Quality level increment required in manufacturing




D.1.3


1.1.3. Trends in regulations and laws


18. Mayor Relevance of environmental policy

19. Demands of special and unusual regulations (per type

of product or flag)

20. Increment of international regulations

21. Increment of national regulations

22. Level of aware as regards the changing of regulations

23. Bigger times required for SSCC approval.

1.1.4. Trends in engineering requirements


24. Engineering project delivery by the Owner

25. Greater requirements for plan approval

26. Increasing requirements of delivery documentation "as

built" and / or product "cad models" and manuals.

1.1.5. Trends in equipment suppliers


27. Tendency to supply complete packages, including its

engineering

28. Delays in the delivery of providers information

29. Lack of responsibility for errors and delays

30. Errors in the information provided by the suppliers




D.1.3


1.1.6 Trends in external engineering suppliers:


31. Bigger dependence on foreign specialized engineering

32. Increasing volume of outsourcing

33. Availability / lack of loyal external resources, with

knowledge of shipyard practices

34. Quality and timeliness of external engineering

35. Lack of responsibility for errors and delays

36. Impact of outsourcing on Cost levels

37. Impact of outsourcing on Production efficiency of

your company

38. Impact of outsourcing on Quality Control

39. Impact of outsourcing on Innovation

40. Impact of outsourcing on IPR protection

1.1.7 Trends in engineering and production tools:


41. Rapid evolution of the external cad systems

42. Problems in the speed and quality of technical support

from suppliers of equipment and / or programs 43. Increasing demand for information to purchase

complex systems and equipment

44. Increasing demand for information on standards,

design criteria and manufacturing criteria to outsource

abroad

45. New demands for special new production machines

(robots, etc..), which affects the overall design




D.1.3


1.2. STRENGTHS (S) and weaknesses (W): (Internal factors)

1.2.1 Finance, Marketing

Scope / description S/W Probability Importance

46. Competition in price

47. Competition in relationships with customers

48. Competition in image / Reputation

49. Competition in Quality

50. Competition in Advance Technologies

51. Competition in Labour cost

52. Competition in innovative products

53. Competition in Material Price

54. Competition in location

Scope / description S/W Possibility Imp / grav

55. Difficulties in getting financing

56. Financial stability

57. Capacity expansion into new products and markets

58. Speed to adopt new technologies

59. Level of knowledge of market developments

60. Own Market Strategy




D.1.3


1.2.2 Labour force and skills


61. Qualification of own engineering personnel

62. Qualification of own production personnel

63. Permanence of Key Technical staff in short and

medium term

64. Level of technical versatility

65. Level of productivity

66. Spirit of innovation


67. Availability of labour force and skills requirements

in your country (Technical – University level)


in your country (Technical – Bachelor level)


in your country (Technical – Workmanship level)

70. Access to skilled labour




D.1.3


1.2.3 Technology - Production:


71. Current facilities (dry docks, sincrolift, …)

72. Investment increment

73. Utilization of the present production capacities

74. Technical expertise in current repair jobs

75. Technical capacity in new repair jobs expected to be

produced in a medium-term

76. Level of standardization and normalization for internal

and subcontractors use

77. Level of standardization of engineering: definition of

work procedures (for internal use and subcontractors)

78. Level of use of shipyard standards and norms by

external engineering

79. Level of standardization of production: definition of

work procedures (for internal use and subcontractors)

80. Level of loyalty with external engineering


81. Cooperation with equipment suppliers

82. Cooperation with owners

83. Cooperation with research Associations


84. Environment protection management.

85. Document management systems

86. Project management systems

87. Integrated production systems

88. Life Cycle tools

89. Control capability of outsourced project




D.1.3



90. Level of definition in the contract documents to avoid

risks in the budget

91. Level definition of the contract documents to reduce

the technical risk to the owner

92. Early definition of the Ship Repair strategy

93. Capability in the realisation of supply technical

specifications to facilitate the purchase of equipment

and materials (for shopping info)

94. Development of engineering for pre-armament blocks,

modules, work areas and stages of product

manufacturing process

95. Flexible organisation




D.1.3


Risk Questionnaire




Please assess the following risk accordingly to your view and experienced and the following risk criteria:

A Risk matrix will be used to assign risk levels to each of the possible combinations of likelihood and

consequences of an event. The number of possible risk levels has been defined according to the purposes

of the study that is being to be undertaken.

It has been considered adequate for the purposes of the task to use a 5 x 5 matrix with 4 levels of risk.

Likelihood

Consequences

Insignificant

(1)

Minor

(2)

Moderate

(3)

Major

(4)

Catastrophic

(5)

A

(almost

certain)

Medium High High Extreme Extreme

B

(likely) Medium Medium High High Extreme

C

(moderate) Low Medium Medium High High

D

(unlikely) Low Low Medium Medium High

E

(rare) Low Low Low Medium Medium

Figure 2 – Risk matrix.

The following table provides the definition for each of the proposed risk levels

Level of Risk Evaluation Criteria

Low Risk (L) Unlikely to threaten the normal operation of the shipyard and/or to affect

significantly the working conditions at the shipyard and/or the

environment.

Medium Risk

(M)

The financial security of shipyards may be affected;

An increase in the emissions for the environment may occur, however not

exceeding the threshold values specified by law;

An augment in the frequency of minor work accidents may occur.

High Risk (H)

Likely to threaten the ongoing financial security of the shipyard;

Emissions for the environment may exceed occasionally the threshold

limits established in the legislation;

An increase of the occurrence of work accidents that require

hospitalization may occur.

Extreme Risk

(E)

Financial threat to the survival of the organization;

Detrimental effects for the surrounding environment;

Increase in the likelihood of occurrence of deadly work accidents.




D.1.3


2.1 Commercial and legal relationships

Between the shipyard and other organizations, e.g. ship owner, suppliers, subcontractors,

classification societies,…

Please assess the following risk accordingly to your

view and experience.

(L) (M) (H) (E)

1

To keep information on suitable suppliers and

vendors that supply best equipment and

technology up-to-date

2 No Technology transfer among shipyards, ship

owners, suppliers, SSCC, administrations,

3 Classification societies approval of new eco-

innovations (processes, modules, structures,…)

4 Mutual recognition on class certificates

5 Ship Owner commitment with the “eco-

shipyards”.

6

Access to materials (such as steel) under market

conditions not limited by local protectionist

measures

7 Access to equipment under market conditions not

limited by local protectionist measures

8 Access to labour force under market conditions

not limited by local protectionist measures

9 Financial/economic crisis




D.1.3


2.2. Regulatory

Statutory responsibilities and duties, inspectorates and other regulatory bodies

Note: The legislation analysis has lead to the conclusion that directives are not applicable to

research activities, development activities or testing of new products and processes.

Determination of legislation rules concerning utilization of eco-innovative processes, structures,

materials and modules in the stage of testing in shipyard can be an encouragement for deciding

to introduce changes during operations.



(L) (M) (H) (E)

1 To keep information on legal and other

requirements up-to-date …..

2 To ensure personnel access to legal and other

requirements.

3 To analyse new or modified legal requirements

to determine how we might be affected …..

4 Environmental rules not equal in Europe

5 Environmental rules not equal every where




D.1.3


2.3. Human resource issues

Recruitment, retention, staff turnover, ….



(L) (M) (H) (E)

1

Competence of Facility personnel performing

tasks that can cause significant environmental

impact.

Note: Competence on the basis of education,

training and experience

2 Lack of availability of labour force and skill

requirements.

3 Increment use of subcontractors “Outsourcing” to

best deal with the current high level demand

4 Own Skilled worked migration (from a point of

view of the yard losing the workers)




D.1.3


2.4. Management activities and controls



(L) (M) (H) (E)

1 Proper implementation of an Environmental

Management

2

Proper implementation of procedures for

monitoring and measuring key characteristics of

operations associated with Significant

Environmental Aspects

3 Proper allocations of recourses for environmental

management

4

Proper integration of new processes, modules and

activities into the environmental effort that

shipyards are developing for the rest of their

facility. Keep programs up-to-date.

5 Proper quantification of Environmental Cost

6 Proper quantification of Environmental Savings

7

Proper Cost Allocation.

Improving the cost inventory and cost allocation

methods are major steps towards greater balance

and rigor in evaluating environmental projects.

8

Proper Accounting finance.

Availability of systems for tracking costs of

operations and evaluations cost/benefits of new

retrofitted vessels

9

Availability of a Purchasing department with

Knowledge of procurement system – Knowledge

of supply chain efforts.

10

Availability of Facilities Engineering:

Management of environmental aspects of new

construction and installation/modification of

equipment.

Considerer environmental of new or modified

products and processes;

indentify pollution prevention opportunities

11 Emission of hazardous material to the

environment.

12 Transparency through publicity available policies

and reporting of indicators.




D.1.3


2.5. Technology and technical issues

Both internal and external to the organization: Innovation, obsolescence and reliability.



(L) (M) (H) (E)

1

Technology Advancement of Pollution Prevention

Tools (LCA).

LCA generally focuses on the environmental

aspects of a specific processes or service, over its

lifetime. Inputs to the analysis include energy use,

waste generation, emission, and release from each

stage.

2

Technology Advancement of Pollution Prevention

Tools (TCA).

TCA focuses on the total cost of a process

including environmental cost which many

assessment methods do not include.




D.1.3


A.6 Annex 6- Owner survey

Owner‟s questionnaire template

OWNER’S QUESTIONNAIRE

To support the Eco-REFITEC project

Ship Owner / Operator Name:

Place:

Contact Name:

Position:

Date:




D.1.3


Questions

1. Is your company aware of the new IMO regulation applicable to your

fleet coming into force in the next few years?

Yes NO

Water Ballast Treatment Systems,

NOx control emissions

SOx control emissions

Ship waste Treatment System

Bilge water Treatment System

Others ( Which others)

- …

- …

2. Did your company do any kind of study to analyse retrofitting projects

needed in your vessels in the coming future to comply with new IMO

regulation?

Yes NO




Ship waste Treatment



- …

- …

3. Which kind of new equipment /systems do your

company need to install on the ships?

Yes NO

In affirmative

case:

Equipment

required


Equipments to control NOx emissions

Equipments to control SOx emissions



Others ( please indicate

- …

- …

4. How do you plan to handle the retrofit In dry dock, While ship is Others:




D.1.3


integration work? outsourced to

repair shipyards.

sailing,

outsourced

external

installation

companies







- …

- …

5. What services should a repair shipyard provide to the owner to carry out

a vessel retrofitting in addition to the installation and commissioning?

Yes NO

Equipment selection

Supply of components

Engineering

No additional services required


- …

- …

6. Has your company any real schedule to carry out retrofitting projects in

you vessels to comply with new IMO regulation?

Yes NO







- …

- …

7. In which year/years is your organization planning to carry out the needed

retrofitting projects?

Year







D.1.3





- …

- …

8. In how many vessels of your fleet are needed any

retrofitting works to comply with applicable regulation?

Number of ships

considered

Ship Type







- …

- …

9. Are these equipment available in the market at

the moment?

Yes NO

In Negative

case:

Why it is not

available?


Equipments to control NOx emissions

Equipments to control SOx emissions



Others ( please indicate)

- …

- …




D.1.3


10. Which are your biggest problems under the

technical point of view to adapt a Water

Ballast Treatment Systems into your existing

vessels? Very

Important Important

Few

Important

Please

enumerate

them

according

their

importance

(*)

Foot print available on the ship

Power Consumption

Water Ballast Production Capacity

Installation Time

Maintenance

Corrosively

Health and safety

Support from repair shipyard

Support from equipment supplier

Systems operation issues

Certification

Others

- …

- …

- …

- …

Any additional Comments

(*) From 1 to 10, with 1 the most important technical problem to address in the refitting.

11. There are different technologies available for the Water Ballast Treatment Systems. According

with your existing fleet needed, do you have any preference technology?

Please mark those you have preference.

Ozonation

Electrolysis

Ultraviolet Radiation

Deoxygenation

Chemical disinfection

Cavitation

Coagulations and flocculation




D.1.3


12. There are different technologies available for the reduction of SOx / NOx emissions. According

with your existing fleet needed, do you have any preference technology?

Please mark those you have preference.

Selective Catalytic reduction

Emulsified Fuel

Adopt Dual Fuel Engines

Waste heat recovery systems

SO2 Scrubbers

Any other

13. Which are the criteria for the selection of

a ship repair and conversion shipyard to

carry out retrofitting projects? Very

Important Important Reasonable

Few

Important

Price

Time to complete the works

Experience in such kind of works

Adequate facilities and resources

Location of the shipyard on vessel‟s

sailing areas

High HSE standards

Others

- …

- …

- …

- …

14. Without taken into consideration the

trading of the vessel; with which areas you

feel more confidence to make retrofitting

projects?

Very

confidence confidence Reasonable

Not

confidence

a. Asia

b. North America

c. South America

d. Europe

e. Africa




D.1.3


15. Is your company working in any study to improve your vessels under

the point of view of environmental, even if it is not compulsory (CO2

emissions per example), or is not coming into force any special rule in

the coming years?

Yes

NO

In Affirmative case could you please specify?

16. Please feel free to add any other comments you have if any.