German repair specialists impress with competence and innovative strength
Sometimes the red tape begins right behind the harbour entrance. For example, in the case of taxation of land power for ships in German ports. If a ship is supplied with power from land during loading and unloading, the captain gets the energy tax-free. However, if he docks on the other side of the harbour at a repair or conversion shipyard, the Treasury holds out the hand for supplying the ship with operating current. Luckily for the shipyards, the financial burden is kept within manageable limits, since competition in the international market is already hard. However, “innovative strength, adherence to schedules, quality and flexibility are the factors that provide German companies with a clear advantage over competitors from low-wage countries,” says Dr. Ralph Sören Marquardt, Managing Director of the Shipbuilding and Marine Technology Association (VSM).
“Reliable and on schedule”
There are more than 40 specialized repair and conversion companies for sea and inland waterway vessels in Germany. Since the demand for new vessels of certain types of ships is low, some new builders are also trying to fit into the retrofitting and conversion segment. “However, the actual competitors are located in the eastern Baltic region or in the Mediterranean,” explains Marquardt. Given the lower labour costs, the shipyards operating there can, in part, make more favourable offers than German companies: “Apart from the price, the customers should pay particular attention to the quality,” emphasizes the VSM expert: “In the end, it is crucial for the ship-owner that he can safely get his ship underway at the agreed date.”
No significant competition in Asia
Minimizing the downtime for a ship is of central importance in the repair business as each day outside regular operation leads to reduced freight or charter revenues. Long access routes can therefore not be considered for classic maintenance and repair work. “As a result, Asian shipyards are currently not a significant competitor for Germany,” says Marquardt. Future-oriented shipbuilders are also making a virtue out of the ship owners’ need: “If the ship cannot come to us, we will come to the ship” has become the principle for the head of the German Dry Docks Group (GDD), Guido Försterling. When it comes to saving the customer time and money, Försterling sends his teams of specialists to job sites all over the world: “Even in the case of urgent tasks or when problems occur unexpectedly, we do not wait until the ship has arrived here.”
Competitive advantage through years of experience
The competitive position of German repair and reconstruction yards in comparison to other countries is the result of their many years of experience – it enables them to carry out complex and complicated tasks even at short notice. Apart from work that requires long-term planning and docking for the extension of the “class”, short-term orders determine everyday life. “The repair business can at best be planned on a quarterly basis,” says Marquardt. If you want to be part of this fast-paced business, you need to master its processes and the necessary planning and logistics services.
These processes are also crucial when it comes to mastering complex large-scale projects. Spectacular conversions such as retrofitting ships for offshore use or extensions or complete renewals of passenger ships are currently the exception on the market. In the year 2016, such projects accounted for just 5 per cent of the total turnover of the repair sector of around 880 million euros. However, the number of complex technical modifications will increase again: due to the international environmental regulations, ships have to be retrofitted with exhaust gas cleaning systems and ballast water treatment plants now or in the coming years.
Regulations create distortions of competition
However, it becomes apparent here that the business of repair and conversion yards is heavily dependent on influences that they themselves can only partially control: “What the international Maritime Organization IMO and the European legislator decide on is ultimately crucial for the equipment of the ships. “ If, for example, the deadline for the installation of ballast water treatment facilities is extended by two years, it will cause damage to innovative manufacturers and conversion yards: “You can’t develop such systems on spec and reserve conversion capacities,” says Marquardt. European regulations also threaten to distort competition, where the so-called Biocide Directive could lead to the fact that German shipyards are no longer allowed to use antifouling hull coatings, which are, however, authorized under international law.
Bewilderment about shore power regulation
Many legislative requirements are currently causing bewilderment at the shipyards – including the issue of “shore power tax relief”. In order to protect the environment, ships are required to turn off their engines and auxiliary diesels in the harbour and instead be supplied with electrical energy from the shore. In order to promote the construction of respective land-based power plants, the EU and the Federal Government have issued tax cuts for the power supply of ships in ports. However, the relief does not apply to ships in repair yards, although the environmental protection effects are at least as great.
The fiscal court of Hamburg clearly confirmed last year that shipyard customers are entitled to the tax refund for their ships. But the Federal Ministry of Finance intervened and prevailed before the Federal Fiscal Court due to interpretation of European law. For this reason, the VSM has been trying to convince politicians and administrations of the factual advantages of the shore power tax relief. “An efficient contribution to the reduction of pollutant emissions in port and city areas could thus be achieved relatively simply and quickly.” Christian Schilling, CEO of VSM is convinced.
It should not fail because of a resulting loss in tax revenue: The total sum for all shipyards amounts to just about one million euros per year. For them, this is just a trifle. “But for our customers it is another cost factor in the competition, even if it is only a few hundred euros for the individual ship. For large conversions with longer lay-down times, the sum can quickly increase to several thousand euros, “Guido Försterling knows.