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Malaysia out from under the radar

Published on: 18 September 2012

Malaysia is not well known for its shipbuilding activities but it has for the past couple of decades been developing a robust industry centred on oil and gas. The oil town of Miri on the island of Borneo has firmly become the centre of shipbuilding in Malaysia.

Close to a dozen shipyards line the banks of the Batang Baram River, where they churn out numerous offshore vessels for both Malaysian and foreign customers.

A handful of shipyards elsewhere in Malaysia are also actively building for the offshore sector but not in the concentrated levels that can be found in Miri.

TradeWinds visited three of the larger shipyards in Miri. Their names, Shin Yang, Nam Cheong and Sealink, are quite familiar to any players in the Southeast Asian offshore scene and are becoming increasingly known to offshore companies further afield.

With the offshore sector still growing in leaps and bounds business at these yards remains brisk. In marked contrast to many commercial shipyards elsewhere in Asia, visitors to Miri’s shipyards will find them a hive of activity.

It is difficult to judge just how busy the yards are by examining their orderbooks. The reason is that most of the newbuildings constructed in Malaysia are built on a speculative basis and sold off once they are close to completion. The yards refer to this as building to stock.

On the surface this would appear a risky business model but in reality it has served them very well until now. Leong Seng Kiat, executive director of Nam Cheong, happily points out that his yard has built 72 speculative vessels over the past five years. “All were sold by the time they were completed,” he said.

Off-the-shelf newbuildings

Offshore players in Asia appear to show a strong preference for these off-the-shelf newbuildings that can be acquired at relatively short notice. One reason being that financing is difficult to come by until they have a firm contract in hand.

“In a way it is like yard financing,” said Vincent Ling, executive director of Shin Yang Shipyard.

Building to stock requires the shipyards to keep a close eye on the offshore market and carefully study what requirements the industry will have two to three years ahead. Nam Cheong, for example, believes that in the future there will be strong demand for platform-supply vessels (PSVs) rather than the standard anchor-handling tugs (AHTs).

“There are a lot of AHTs in Asia but not many PSVs, where demand for the type is increasing,” Leong explained.

Yards aim to read customer requirements

Often shipyards have long-standing relationships with their clients and will build ships according to what they believe customers will require next. If, for example, a customer places an order for two ships and hints that it may require more of the same type, the yard may go ahead and begin construction of a third and hope the customer will pick up that vessel as well. Or the yard might start working on a vessel if it knows one of its clients is likely to win a contract requiring such a ship. If not required, these vessels will be sold to other owners who need a similar type of ship.

Speculative newbuildings by nature need to be fairly versatile vessels that can readily be used for whatever purpose the end user needs them for.

“We try to build vessels that are easily adaptable so that they can be modified cheaply,” explained Sealink chief executive Yong Kiam Sam. Yong’s company is also a sizeable offshore player so it builds vessels its chartering department believes it requires, although the company is happy to sell them on before or after delivery. Yard managers at Sealink concede that the vast majority of ships they build are sold on before delivery.

Increase in built-to-order vessels

As the shipyards in Miri build up a good reputation with offshore players, they are beginning to attract more build-to-order contracts from customers looking for very specific vessel designs. These built-to-order vessels are becoming an increasingly dominant part of the yards’ orderbooks.

Shin Yang’s Ling says the majority of vessels his yard constructs now are built to order rather than speculatively. “We prefer to get orders. Speculative ships require a lot of changes, which means more work for us,” he explained. Shin Yang recently received an order for two supply vessels from a Bruneian owner.

Nam Cheong has also been getting more direct orders, the latest being a series of eight multipurpose support vessels from Bumi Armada, a contract that is valued at $130m for the initial four ships. The remainder are option vessels.

Miri’s shipbuilders are likely to maintain a balance of ships that are built to order and built for stock. Contracted ships provide a solid, secure orderbook, while speculative vessels plug gaps and keep yards working at high capacity. Their combined output will continue to see Malaysian shipbuilding on the radar, at least where offshore shipping is concerned.

by Jonathan Boonzaier Miri

(Source: Tradewinds August)  

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