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Continuous high demand for
vessels in the region is expected to drive
growth of shipbuilding companies, industrial
players observed.
Strong activities in the oil and gas sector to
step up oil discoveries due to a surge in oil
prices and high charter rates are said to fuel
the demand for vessels.
However, despite the strong demand, supplies of
vessels remained tight in view of the long
lead-time to construct a vessel. Hence,
shipbuilders are expected to remain busy
catering to the rising orders.
Shin Yang Shipping group, a broad-based shipping
company in Sarawak, is confident of strong
growth in its revenue this year from its
shipbuilding business.
Group general manager Capt Ting Hien Liong said
the company's two shipyards in Miri and Bintulu
were currently fully occupied catering to the
escalating demand from the oil and gas industry
in building its offshore supply and utility
vessels.
He added that the robust growth in the
transportation industry for ocean cargo had also
resulted in many customers placing orders for
general cargo ships.
“We expect revenue to increase by 50% from
RM200mil to RM300mil for this financial year
ending Dec 31 driven by the demand from these
sectors,” he told StarBiz.
Shin Yang group, established in the early 80s,
concentrates on regional and domestic shipping
services, ship building, repairing and
conversion. It is also involved in engineering
fabrication and offshore structure fabrication.
On its expansion plans, he said Shin Yang
planned to build another shipyard in Tanjung
Manis in Sibu to cater to the growing demand.
“The new yard will double our shipyard size from
160 acres to 330 acres,” Capt Ting said, adding
that the new shipyard would also provide for
repair works as well as modifications and
conversion.
“We also modify ships for customers to
accommodate changes in merchant rules and
regulations,” he said.
Capt Ting said that the company's order book was
at RM500mil with deliveries stretching into
2009. This does not include the order for six
units of general cargo ship totalling RM420mil
contracted via its sister company, Shinline Sdn
Bhd.
“The six units would be completed by 2011,” he
added.
Capt Ting explained that one of the reasons why
the company had a low order book compared to its
peers was because it practised the build and
sell concept.
“We keep a few half-built vessels in our stock
and customers are able to book these vessels if
they are happy with the specifications,” he
said.
He noted that this was one way to speed up
delivery time taken for orders.
“We also pre-book the engines required for these
vessels as one of the reasons for the lag in
delivery time was due to the waiting period for
these engines,” he explained.
He stressed that speedy delivery time was its
main attraction in drawing customers from as far
as Europe, Australia and the Middle East.
Shin Yang also employs the services of
shipbrokers based overseas to promote its
company and its merchandise.
These efforts have contributed to the increase
in its client base consisting of 60% foreigners
while the rest are local.
Capt Ting stressed that the steady uptrend in
steel prices over the few years had not
diminished demand for vessels.
However, the shipbuilder has experienced an
increase in operation expenses but managed to
transfer the cost to customers.
“Besides increasing our selling price for
vessels, we are also commanding higher charter
rates for our ships,” he said, adding that the
company had also aggressively expanded its
transportation services for ocean freight to
defray rising costs.
Analysts said the financial performance of
shipbuilding companies remained unaffected
despite the rise in the costs of raw materials
such as steel.
An analyst with Kenanga said Coastal Contracts
Bhd had managed to maintain its profit margin at
a comfortable level despite the heightened raw
material costs.
“Coastal Contracts have been minimally impacted
as it was able to command a higher selling price
to absorb these price increases,” he said.
According to an analyst of another local
brokerage, vessel fabricator Boustead Heavy
Industries Bhd locks-in the price of steel when
it secures contracts from clients to mitigate
the risk of escalating prices.
“However, steel prices only account for 15% of
vessels. The major component of steel will
actually be the vessel engines and equipment
that makes up 70% of total cost,” he said.
An analyst with TA Securities added that the
escalating costs of raw materials being a global
phenomenon, would have affected all shipping
companies in a detrimental manner.
“However, the overwhelming demand for vessels
due to increased capital expenditure spending by
oil majors, has cushioned the effect of mounting
costs,” he added. |
