Consultant: Marine propulsion spending to set new records

Oct. 18, 2004
Spending on marine propulsion systems by the world's shipbuilding industry will reach $5.3 billion this year and continue to rise, according to a study covering 2004-08 by analysts at Douglas-Westwood, Canterbury, UK. The report, released in August, is based on vessel data from Lloyd's Register—Fairplay.

Spending on marine propulsion systems by the world's shipbuilding industry will reach $5.3 billion this year and continue to rise, according to a study covering 2004-08 by analysts at Douglas-Westwood, Canterbury, UK. The report, released in August, is based on vessel data from Lloyd's Register—Fairplay.

The study further predicts that, over the period, shipbuilders are likely to spend $27.2 billion, compared with $22.4 billion over the previous 5-year period, an increase of 21%.

In 2004 alone, engines are likely to be installed with a total power output of 18 Gw, the equivalent, says analyst Barney Parsons, of "the output of about 15 nuclear power stations."

Shipbuilding boom, return

Parsons cited the current strong upturn in world shipping and shipbuilding and the buoyancy of world economic growth, expecting it to "remain strong in the medium term boosted by the very strong growth of the Chinese economy and to a lesser extent in other developing economies."

World shipping has increased, he said, in part because of a boom in demand for such commodities as oil and steel. The growth in profitability in commercial shipping during the previous decade has led to "a surge of orders for vessels and yards currently have full order books.

"We expect record years ahead with shipbuilding output exceeding 40 million gross tonnes in 2005 and 2006 with compensated gross tonnage output in 2006 of 26 million," he said. The total value of shipbuilding output will peak at about $45 billion in each of these 2 years with 1,864 vessel deliveries and more than 2,850 main engine installations.

But such high output levels cannot continue for long and in 2007-08, "we expect a return to more normal activity levels as the new tonnage is absorbed by the market. The long-term overall growth trend is however likely to continue for the foreseeable future."

Shipbuilding is a highly cyclical industry, said Parson. "Periods of high owner confidence tend to result in an excess of tonnage which takes the heat out of shipping markets until it is absorbed and the next global economic upturn triggers the next up-cycle.

"Discounting these cycles, the long-term picture is one of growth. This is also the case for marine propulsion."

Chinese yards, LNG

Parsons said that in 1999, Chinese shipyards "accounted for 7% of main engine installations by value. By 2008, we forecast this to grow to 13%."

Korea will also deliver more vessels in Douglas-Westwood's forecast period but, because of China's effect, "will not grow its share."

Japan's output will be relatively steady; other Asian countries will improve their performances, said Parsons.

"Europe will continue to have a high share of the propulsion market as a result of supplying a greater proportion of high-powered multi-engined vessels."

Parsons also said that the high power requirements for container vessels "mean that this vessel sector will continue to require the greatest amount of main engine power."

But, he added, the vessel sector "with the strongest growth will be specialized LNG vessels. This fleet will grow considerably as the LNG business grows" and the values of engines and propulsion systems installed will "more than double" over the next 5 years.