Repair Yards: Paying the Bills

Repair Yards Paying the Bills

By Todd Vorenkamp 2015-09-04 16:30:00

It’s not glamorous, but routine maintenance and unscheduled repairs are most yards’ bread and butter.

The ship repair business has steadily recovered from the economic slowdown of the last decade, and more business is on the horizon. Drydocks and repair facilities report solid bookings, and the recent surge in Jones Act newbuilds bodes well for the future.

Repair yards are kept busy by both scheduled drydockings and emergency work. Scheduled maintenance is 90 percent of the business and the remainder unscheduled repairs. Vessels come in for drydockings according to the rules of the classification societies when sea-connections need to be inspected and class-approved and when the vessels need to be sand-blasted and painted, which can only be done “out of the water.”

Time Is Money

It’s an old adage, but especially true in the repair business. For the customer, a commercial vessel that is taken out of service is a large financial liability. Not only is it not carrying cargo from port to port but it costs the company money to keep the vessel in a yard for refit, cleaning, regulatory updates and repairs.

This applies especially to companies running a small number of vessels on a trade route like TOTE Maritime with its Jones Act tankers on the Alaska run. With only two vessels, when one is in the yard you have an immediate 50 percent reduction in operations and revenue. A second expense arises when the repair yard is not in a port that the vessel calls regularly, which is usually the case. So cargo must first be discharged, and an empty ship will make the transit to the drydock.

Repair yards shouldn’t mind a lengthy visit from a vessel as it accumulates day rate fees, labor costs and more. However, they have schedules too, and there is likely another vessel waiting for its time alongside or in the drydock.

In 2004 Charleston-based Detyens Shipyards, the largest commercial yard on the U.S. East Coast, set a goal to become the best ship repair facility in the U.S. Their mission became to get their customer into the yard and back out to sea “on schedule and on budget” and, when the vessel departed, to have the owners “leave happy and as our friend.” The first step in meeting this objective is to maintain the projected schedule.

Similarly, Seattle-based Vigor Industrial’s COO Dave Whitcomb says, “Planning and decision-making are critical to efficient ship repair.” Government vessels generally plan their yard periods further in advance than commercial customers, but once in the yard the consensus from several sources is that decision-making is incredibly slow. One anecdote involved a welding decision that took almost a month to approve and then a week to execute. With a day rate plus labor cost of $30,000-$40,000, waiting a month to begin the process is an expensive delay. For Whitcomb, the ideal Vigor customer comes in with a plan, knows what has to be done, limits any spiral increase in the scope of the work, makes rapid-fire decisions on changes in the specified job, provides clear communications and, finally, pays on time.

Michael Cranston, President of Bayonne Dry Dock, says government contracts are good at defining the scope of work far in advance when compared to their commercial counterparts, but commercial owners still get in and out faster because of a more streamlined process once in the yard.

Accommodating the customer’s demands is at the center of MAN PrimeServ’s fresh approach to the business of ship repair. According to Anders Remmer, Section Manager, Business Support, MAN PrimeServ Copenhagen, “We have seen a new trend in the market where customers seek a closer relationship with us, expanding our role from a simple supplier to more of a business partner.” MAN is stretching pre-work planning and analysis out as far as seven to nine months ahead of the vessel’s arrival in drydock. This gives the facility a large lead time to order parts that need replacement and ensure that the infrastructure is in place for the work required.

Divesting Traditional Services 

Bayonne’s Cranston says outsourcing is “the biggest change in ship repair in the past 20 years.” Yards used to be a one-stop shop for all the customer’s needs, but not anymore. Most yards that have survived have maintained their core workforce and services while outsourcing less frequent and more specialized services to subcontractors.

Bayonne keeps all of its management and supervisory roles intact. It also maintains a reduced number of personnel to oversee and perform the primary trades of the ship repair business. Coatings, large mechanical work, electrical work and piping are all now outsourced.

Vigor also maintains a core competency workforce that handles hull repair, coatings, simple electrical, small mechanical, structural and piping. Outsourced are tank coating, insulation, complex electronics, engine controls, propulsion, refrigeration, and galley and accommodation work. When it comes to electronics, Whitcomb says, “We might pull wire, but electronics company reps will do the tech work.” It’s critical to the efficiency of the yard, he says, to subcontract the work where you are “not doing enough volume to be good at the trade. If you have a propensity to do everything, you’ll find that you can’t do everything well.”

Process Improvements

Detyens recently underwent extensive infrastructure upgrades to enhance its environmental consciousness as well as the safety of its clients and workforce. More power and amperage were added to pier facilities along with upgrades to firefighting capability. With an eye on the future, it has established a CNC (computer numerical control) machining apprenticeship program and a welding school to train the next generation of shipyard workers.

At Bayonne Dry Dock, computer technology has enabled the company to engage in complex 3D-design imaging and perform computer overlays for vessel modifications, all leading to faster turnaround and shorter yard periods for customers. It’s also working with the state of New Jersey to install a waste water treatment system, the first of a number of environmental-related modifications it sees coming in the next five years.

MAN PrimeServ’s Remmer observes, “We have for some time seen a market demand for a drydocking maintenance kit for engines, consisting of all the components required to conduct a complete engine overhaul during the drydock. The first step is a pre-docking inspection, ensuring the foundation for our recommendations. The result of the inspection is a detailed report on the engine’s condition as well as a list of recommended spare parts. Based on this we create an offer for these spare parts.”

Luxury Yacht Services

Much of the ship repair business, particularly in places like South Florida, is focused on large private motor and sailing yachts. James Brewer, Director of Business Development for Derecktor Shipyard in Fort Lauderdale, says the luxury yacht owner’s motivation is different than that of the commercial owner. A commercial owner, he explains, is looking for maximum efficiency, cost-savings and on-time service, whereas the yacht owner is looking for a high standard in outfitting a vessel and is less concerned about the time in drydock or the budget.

Depending on the class society’s requirements, a luxury yacht will undergo an extensive yard period every five or ten years, but the vessels are usually hauled out every 12-18 months for normal maintenance, keeping yards busy. Derecktor, primarily a builder of world-class yachts, emphasizes supporting both the product and the owner throughout their lifetimes with an eye on gaining repeat business.

With the economic downturn of the recent past, orders slowed and so did the repair business. However, the luxury yacht market is recovering and, according to Brewer, most of the top builders have a backlog of orders for vessels of more than 75 meters in length. While the service and repair side of the market currently lags behind new orders, it will improve over time.

Critical, Not Sexy

According to one executive at a major U.S. shipyard, “Ship repair is not sexy and glamorous but is, without a doubt, a critical part of the maritime infrastructure.” And a critical part, no doubt, of shipyard profitability as well. – MarEx

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