Download Published May 27, 2003

Published July 24, 2003
Hock Lock Siew
Jurong shipyard shows the way
THE contract won by SembCorp Marine's Jurong Shipyard this
week to build two container ships may not seem like the biggest of
deals. Worth $110 million, the order calls for the building of two
vessels each capable of carrying 2,600 twenty-foot equivalent container units for
Taiwan's Wan Hai Lines, with options for two more similar vessels exercisable by
October.
By BETH JINKS
The deal is not be sneezed at. It is, in a sense, a coup for Singapore's marine industry, which, while
boasting record 2002 revenues of $4.4 billion, is an insignificant player in building container ships.
The local industry is dominated by ship repairs and offshore industry vessels and support craft,
floating production craft, pipeline layers, vessel conversions and tug boats.
The lion's share of SembCorp Marine's business also comes from these areas. But Jurong Shipyard despite the competition from South Korea's government-subsidised mega-yards, low labour costs in
China, and Japan's well-established, high-quality yards - has quietly carved a niche for itself in
building small to medium-sized container ships.
SembCorp Marine's foray into the building of container ships began in 1997 with an order for four
relatively tiny 830 TEU vessels that the shipyard designed and built in-house.
Since then, there has been a steady flow of orders. By 2000, Jurong Shipyard had secured orders for
six larger 1,078 TEU capacity vessels, and is currently well into production of two much bigger 2,500
TEU ships. This new order represents the biggest container ships ever built in Singapore - and are of
a local design. Despite the likely narrow margins, SembCorp Marine is confident it will make a profit
from the work.
Untapped market: Nurtured carefully, this is a relatively untapped market that could become a
major niche that should not be overlooked by other local yards.
But while demand for these ships is growing, particularly from Asian feeder lines, few Singapore
yards have ventured into the building of container vessels. ST Marine did build a 1,018 TEU container
ship in 2000, but has since focused its effort on more traditional sectors.
One factor in Singapore's favour is that the dominant South Korean yards are full. A small order of
medium-sized vessels would struggle to find a construction slot in yards pumping out massive ships
to fill bulk orders from mainline customers. Announcing this week's order, Wan Hai Lines' senior vicepresident Jason Lee made a telling comment: 'The key factor for placing the contract with Jurong
Shipyard is that Jurong's specification is superior to the other designs that we have reviewed. Also,
the system of shipbuilding is very similar to that of Japanese shipyards.'
SembCorp Marine began as a joint venture between Singapore and Japan's Ishikawajima-Harima
Heavy Industries (IHI). These Japanese roots have contributed to Jurong's reputation for quality without all the higher costs associated with Japan construction.
Jurong Shipyard's niche market proves that some customers are willing to pay more for quality
construction and timely delivery - even in an industry where cut-throat competition and slim margins
are notorious. Its quiet success should alert other local yards to at least look into the market's
potential - before they miss the boat.