Why Singapore yards are still ahead of Chinese, Korean rivals

Delays and overruns causing competitors' headcahe.

According to Nomura, despite concerns on the street about stiff competition from Chinese yards, we continue to believe Singapore-based offshore yards are best placed to maintain a leadership position in the offshore segment.

Here's more:

Chinese yards have witnessed delays and cost overruns. There have been instances where vessels built in China have had to be moved to Singapore to be re-worked.

Given all-time high dayrates for rigs, established operators are therefore unwilling to trade reliability and project discipline for marginally lower prices or more attractive payments terms. The exhibit below highlights the gap in execution between China and Singapore yards.

Not all Chinese yards are equal. Among the many Chinese yards that have been competing in offshore, Dalian Shipbuilding is the only one that has met with reasonable success in capturing offshore orders on a consistent basis.

According to data from ODS-Petrodata, Dalian Shipbuilding has captured ~30% of all jack-up (JU) orders secured by Chinese yards in the past three years. Additionally, it has a secured 13% of all JUs ordered globally in 2008-13. Since 2004, the yard has delivered a total of 11 JUs to customers and currently has 16 newbuild JUs under construction or on order at its yards.

That said, we believe that, given the general state of affairs at China shipyards, there could be an overhang, limiting Dalian’s share gains.

Korean yards to compete only in pockets as Singapore yards move up the value chain. The Korean yards, in our view, will continue to compete only in limited segments such as semisubmersibles, ultra-high spec JUs and topside modules.

Additionally, we note that Singapore yards continue to move up the value chain and have strong market in high spec categories.

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