Troubled waters ahead for the ship industry

Safety standards in the shipping industry are being threatened by the unprecedented demand for new ships worldwide and the rush by some young upstarts to deliver orders in shorter periods of time, industry sources have warned.

As demand for industrial ships is rising, traditional shipyards have been overwhelmed with orders due to limited space and many appear to be struggling with their available resources to meet their orders within record time.

But industry players and observers have underlined their reservations on the likely impact of such an unprecedented demand on construction standards as new shipbuilders enter the market in a quest for instant profits.

They are worried that safety standards across the general shipping industry risk being compromised as shipbuilding companies try to cash in on the demand.

"Construction standards are beginning to fall in some of the shipyards and there is major cause for concern on the safety of new generation ships," said Richard McArthur, a leading shipping analyst and industry watcher who is based in Kuwait.

"Something needs to be done by authorities that regulates these new shipyards."

McArthur said falling standards can be attributed to the mushrooming of new yards, especially in Asia, which are smaller shipyards run by local governments or private groups, or set up as joint ventures.

"The surfacing of new shipyards without any record or reputation is putting an end to the effort that this industry has played over the past two decades to make ships safer and more dependable," he said.

There are currently a total of 8,643 major industrial ships of all types and sizes on order worldwide.

These include 2,675 tankers of all sizes, 3,005 dry bulk carriers, 2,760 liner vessels and 203 LPG tankers, according to the latest statistics compiled by the renowned Paris-based Barry Rogliano Salles shipbrokers.

And last year, the order books at Chinese shipyards surpassed those of Japan, to become second in the world after South Korea.

But in terms of new orders, China was number one, totalling 98.5 million deadweight tonnes, or 42 per cent of the global total. Eighty per cent of the output of China's shipyards is exported and this comes on the back of a global boom in shipping.

While China has got some of the best shipyards in the world, there are currently 3,000 smaller shipyards, up from just 350 a decade ago, all trying to cash in on the industry boom there.

"Safety and quality standards do not seem to matter a lot to the new shipyards and this trend is extremely worrying," said Ramesh Ramakrishnan, CEO of Transworld Group, which owns Balaji Shipping Company, one of the largest shipping companies operating in the region.

Ramakrishnan added that there is a general shortage of skilled people with technical know-how of ship designing and building.

"Ship yards are springing up everywhere, but there are no qualified ship designers and builders to work there. This has led to low-quality work," he claimed

At a recent International Shipbuilding Conference in Athens, Greece, it was revealed the shipbuilding industry had been growing too fast for the past five years and too few of the new builders had been able to acquire the proper knowledge or resources.

"It is my personal opinion, but maybe 30 per cent or maybe 40 per cent of ships delivered by these [new] shipyards are going to be sub-quality.

"This market will leave unsafe ships for sure," said Simon Liang, chairman and chief executive of Sinopacific Shipbuilding Group, which five years ago was delivering two vessels a year but has 45 deliveries scheduled for 2008.

While the safety threat is becoming a global phenomenon, a number of industry players in the Middle East are confident that low-quality ship builders will have no chance to operate in the region due to strict safety regulations that govern the marine sector. And the UAE Government is in the process of changing the 1981 Federal law No26 regarding ship registration in order to conform to international maritime standards, a move that will enable it to enforce stricter policies regarding safety.

"Marine safety is a top priority for ship registration in the UAE and vessels that do not meet our safety requirements can not operate here," said Badreya Ahmed Al Dhahri, director of Marine Affairs Department at the National Transport Authority, tasked with the registration of all ships in the UAE.