Shipyard industry gains momentum.
The industry has faced a host of problems so far especially in raising capital. Banks are still reluctant to funnel in large fund to shore up the industry. Banks still see venture in the industry as carrying high risk and less profitable compared to other industries.
The shipbuilding capacity of 370 shiptards in the country totals only 400,000 DWT a year. Small shipyards with a capacity of building ships measuring up to 1,000 Gross Tons (GT) or 1,500 DWT account for the largest part of the total capacity. A number of other shipyarsd have a capacity of building ships measuring up to tens of thousands GT. There is only one shipyard with a large building capacity of building ships measuring 150,000 DWT. Repair capacity totals 6 million DWT a year.
The industry is still dominated by state companies including PT. PAL, PT. Dok Perkapalan Surabaya, and PT. Dok Kodja. Main private companies are Labroy Shipbuilding Batam, Pan-United Batam, Dumas-Surabaya, ASL Shipyard-Batam, Batamec-Batam, Bristoil Offshore Indonesia-Batam and PT. Mariana Bahagia-Palembang.
The last several years, the industry has recorded a steady growth marked with shipbuilding contracts signed. Most orders have come from the government including for ferry ships and pioneer ships. Fevvry ships are generally the class of roll on-roll off (ro-ro). Meanwhile, demands for ships in the world have increased lately. A number of orders have been received from foreign companies and governments.
The country has 370 shipyards with a total capacity to building 400,000 DWT of new ships a year. Their repair capacity totals 6 million DWT. Around 80 of the shipyards are in Batam and the rest in various other areas in the country.
Small shipyards account for the largest part of the capacity with only 5 shipyards having the capacity to build new ships measuring 10,000 DWT.
Around 83% of the shipyarsd have the capacity of building new ships measuring only 3,000 DWT. Their production facilities have also been too old and need modernization.
The country's shipbuidling industry, therefore, remains in the doldrums failing to take full advantage of the growing demand for ships in the world market.
In three years until 2007 the production of the country's shipyard industry in new ships and repaired ships continued to increase significantly--increasing 105% in 2005 in new ships to 120,100 GT valued at Rp 2.25 trillion. In the same period repair work rose 14.3% on 2.8 million GT of valued at Rp. 875 billion.
In 2006, shipbuilding production rose 70% to 200,500 GT valued at Rp4.75 trillion. Repair work was valued at Rp1.35 trilion on ships totaling 4.2 million GT or an increase of 50% from 2005.
In 2007, shipbuilding production rise further by 62% to 325,000 GT of new ships valued at Rp6.25 trillion and repair work was valued at Rp1.95 trillion on ships totaling 5.2 million GT or an increase of 23.8%.
The cabotage principle, which is implemented by phases since 2005 contributed to increase in orders for new ships in the country. Meanwhile orders from abroad have also increased. Orders from abroad are generally for ships measuring at least 50,000 DWT.
Bulk cargo ships are among the main types ordered by foreign buyers. PT PAL has received orders for three units of double skin bulk carriers (DSBC) from Turkey to be delievred in the next few years.
The country's shipbuilding industry has shown improvement in market competition as indicated by the growing exports of ships and components in the past three years. In 2005, ship and component exports surged 230% with value reaching US$ 174 million. Increase was recorded further in the following two years to reach US$ 299 million in 2006 and US$ 361.5 million in 2007. See the following table.
Meanwhile, imports of ships have fluctuated sharply. Imports grew in value 351% to US$ 1.19 billion in 2006.
Imports of ships have been made mainly by private companies financed by foreign financing agencies or banks. Shipping companies are in difficulty in buying ships from local shipyard as few banks are ready to finance transactions in the shipping sectors. Imports of components have tended to be stable See the following table.
Demands for new ships in Indonesia are predicted to continue to increase in the coming years especially with the implementation of the cabotage principle. In 2006, demands for new ships totaled 2,142 units including General Cargo, Container, Bulk, Barge, Tug Boat, Tanker, passenger and Ro-Ro ships.
The largest demands are for General Cargo ships, Barges, and Tug Boats. Demand for cargo ships has increased especially with growing demand for the transport of primary commodities including coal. Coal shipments are brisker in the country with the growing coal consumption especially for industries including coal-fired power plants, cement industry, etc.
A significant increase has been recorded in the demand for new ships in the 2005-2007 period. Demands were recorded at 15,044 GT in 2005 including 11,755 GT in cargo ships.
In 2006, orders for new ships from buyers in the country totaled 41,652 GT or an increase of 177%. In the following years orders rose to 205,341 GT or an increase of 500%. Most of the ships ordered were cargo ships totaling 200,000 GT.
Orders from abroad also increased mostly for ships measuring up to 50,000 Dead Wight Ton (DWT), which could be met only by large shipyards. The types of ships needed most are tankers to replace the ld types with new ones as required by the International Maritime Organization (IMO). In addition, the type of large multipurpose vessel (container-passenger-cargo vehicles, passenger vehicles).
Indonesia, therefore, needs to invest heavily in shipbuilding industry to build shipyards with a capacity to build ships measuring up to 300,000 DWT
Capacity Utilization High
By mid 2008, there were 41 units of ships totaling 776,973 DWT being built in Indonesian shipyards. Assuming that the construction of the 41 ships is completed in three years, the capacity utilization of the country's shipbuilding industry is 64.7% a year until 2011.
The new ships ordered are more than 3,000 DWT each in measure excepting two Ro-RO ships measuring 1,100 DWT each. Based on the figures, effective capacity of the country's shipbuilding industry is 328,000 DWT and capacity utilization is 79% until 2011.
With such capacity utilization it will be difficult for the shipyards to accept more orders both from local and foreign buyers. Thereforer, the country needs to expand the capacity of its shipbuilding industry.
A number of local and foreign investors plan to build new shipyards in the country. PT. Dok Surabaya plans to build one over a 20 hectare plot of land in the sub-district of Brondong, the regency of Lamongan to be operational by the end of 2009.
The new investments are expected to meet growing demand for ships in the country. In 2008, orders accepted by PT. Dok Perkapalan Surabaya rose 40% compared with last year. Ships built in 2007 were valued at US$40 million. The value of orders for ships to be built in 2008 is forecast to reach US$70 million.
Cargo shipping company Arpeni Pratama Ocean Line also plans to build shipyard with an investment of Rp 3.25 trillion which will have the capacity to build ships measuring up to 300,000 DWT. The project is expected to be operational in 2014.
PT Waruna Nusa Sentana also has plan to invest Rp350 billion to build a shipyard in Belawan, North Sumatra with a capacity of building ships measuring up to 50,000 DWT. Meanwhile, PT. Jasa Marina plans to build one with an investment of Rp250 billion and with a capacity of building ships measuring 30,000 DWT.
Earlier, in 2007, a number of investors planned to build a number of shipbuilding facilities. One of them was PT Daya Radar Utama planning to build one with a capacity to build ships measuring 50,000 DWT.
Among foreign investors planning to build shipbuilding factories in the country include Sun Wo, C & Heavy Industry, and 21th Century Shipbuilding--all from South Korea and Dubai Drydocks World Ltd from the United Arab Emirates. Dubai Drydocks plans to build one in Batam with an investment of US$500 million with a capacity yo build tankers measuring more than 100,000 DWT the type of very large crude carrier (VLCC).
Shipbuilding industry in the country is capital intensive. The shipyards have the capacity to build ships measuring up to tends of thousands of DWT.
The facilities, however, are small in category with a capacity to build ships measuring only up to 3,000 DWT. They account for 83% of the total building capacity of 400,000 DWT a year. Shipyards with a capacity to build ships measuring between 30,000 DWT and 40,000 DWT account for only 3% of the capacity. Therefore, only a few have the capacity to build large commercial ships.
The country's shipbuilding industry in three years until 2007 expanded rapidly with leapfrogging increase in production. The rapid expansion followed the gradual implementation of of the cabotage principle in line with the presidential instruction No. 5 in 2005.
The growing orders resulted in high capacity utilization that the industry could not be expected to accept more orders to build new ships. The country's shipbuilding industry, therefore, needs to expand its capacity especially for larger ships measuring up to hundreds of thousands of DWT to meet the world's trend.
Table--1 Shipbuilding and repairing capaicty of Indonesian shipyards, 2006 Building capacity Installed capacity /y Number Class of facility (unit) GT DWT < 500 99 21,000 31,500 501 - 1,000 27 17,000 25,500 1,001 - 3,000 8 10,000 15,000 3,001 - 5,000 10 37,000 55,500 5,001 - 10,000 11 50,000 75,000 > 10,000 5 130,000 197,500 Total 160 265,000 400,000 Repairing capacity Installed capacity /y Number Class of facility (unit) GT DWT < 500 121 480,000 720,000 501 - 1,000 45 495,000 742,500 1,001 - 3,000 25 455,000 682,500 3,001 - 5,000 6 400,000 600,000 5,001 - 10,000 7 900,000 1,350,000 > 10,000 6 1,270,000 2,905,000 Total 210 40,000,000 6,000,000 Source: ICN Table--2 Volume and value of production of shipyards in new ships and repairs, 2002-2007 Volume (GT) Year New ships % Repairs % 2002 44,250 -- 2,350,000 -- 2003 47,250 6.8 2,600,000 10.6 2004 58,275 23.3 2,450,000 -5.8 2005 120,100 106.1 2,800,000 14.3 2006 200,500 66.9 4,200,000 50.0 2007 325,000 62.1 5,200,000 23.8 Value (Rp billion) New Growth Year ships Repairs Total (%) 2002 1,105 405 1,510 2003 1,175 445 1,620 7.3 2004 1,460 465 1,925 18.8 2005 2,250 875 3,125 62.3 2006 4,750 1,350 6,100 95.2 2007 6,250 1,950 8,200 34.4 Source: BPS, processed Table--3 Exports of ships and components (US $ Million) Year Ships Components Total Growth 2002 52,11 8,9 61,01 -- 2003 92,56 7,97 100,53 64,8 2004 47,42 5,23 52,75 -47,5 2005 171,30 2,72 174,02 22,99 2006 294,10 4,80 298,90 71,8 2007 354,20 7,30 361,50 20,9 Source: BPS, processed Table--4 Imports of ships and components (US$ million) Growth Growth Growth Year Ships (%) Components (%) Total (%) 2002 252.47 26.93 279.40 2003 209.37 -17.1 48.15 78.8 257.52 -7.8 2004 203.26 -2.9 32.79 -31.9 236.05 -8.3 2005 264.28 30.0 48.11 46.7 312.39 32.3 2006 1.192 351.0 58.10 20.8 1.250.10 300.2 2007 426.20 -64.2 199.80 71.8 526 -57.9 Source: BPS Table--5 Ship requirements in the country following gradual implementation of cabotage principle starting in 2005 Number of ships 2006 Demand for new ships Type of ships (unit) (unit) General Cargo 1,338 800 Container 107 80 D bulk 46 30 Bare 1,408 500 Tug Boat 1,,57 500 Tanker 233 132 Passenger 229 50 Ro-Ro 60 50 Total 4,828 2,142 Source: Road Map of shipbuilding industry, Industry Ministry Table--6 Orders received by Indonesian shipyards until July 2008 Average measure of Types of ships Unit DWT ships! (DWT) Dry Cargo 13 104,875 8,067 Container 1 4,180 4,180 Tanker 16 209,300 13,081.3 Bulk cargo 9 456,400 50,711.1 Ro-Ro 2 2,218 1,109 Total 41 776,973 -- Capacity per year 400,000 328,000 (*) Capacity utilization (%) 64.7 78.9 Note: (*) Capacity of shipyards for ships measuring more than 3,000 DWT Source: LR Fairplay
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|Publication:||Indonesian Commercial Newsletter|
|Date:||Aug 1, 2008|
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