The Switch: Shipyards, shipping must shift away from a blinkered approach to CAPEX

Shipyards, and the industry that supports them, must shift away from a blinkered approach to CAPEX, Asbjørn Halsebakke, Director, Technical Solutions, Marine, Yaskawa Environmental Energy / The Switch, argues.

“By expanding our horizons beyond cost, and considering benefits and value,” he says, “all of shipping’s stakeholders can reap huge rewards.”

Halsebakke explained that it is difficult to break established patterns of behavior and something that is accepted and viewed as “conventional wisdom,” even when it’s not in the slightest bit smart.

“There’s always, ALWAYS, a focus on CAPEX. What will this ship cost? Can we make it any cheaper? How does it compare to what I can get from Yard B? If we can save money, or undercut the competition, it’s surely good for business, yes?” he said.

Understandably, the shipping and the shipbuilding sectors are in a situation where they feel a huge financial strain from the global disruption caused by the COVID-19 pandemic as well as the economic pain it has caused.

As such, yards are under pressure to push out vessels as cheaply as possible

However, cheapness doesn’t necessarily deliver value.

“Savings for owners in CAPEX can be far, far outstripped by costs in OPEX over a vessel’s lifetime – or even over the first few years of operation,” Halsebakke further argues.

“At present, there’s extreme short-term pressure and that fuels the need for short-term savings. But it’s often bad for everyone – for the yards (forced to slash prices), for the owners (who don’t get the best value solutions) and for society, who simply don’t get the environmental performance and standards they deserve.

“And because this is ‘conventional wisdom,’ we keep on making the same mistakes, over and over again, ship after ship after ship.”

Halsebakke believes the system needs a reboot by factoring in green, sustainable solutions.

Geen technology costs more and that’s why yards don’t tend to offer truly green solutions in their newbuilds unless specifically pressured to. Which, as yet, doesn’t happen enough.

“So, yes, CAPEX may be more. But what if OPEX could be considerably less?”

“We focus on solutions that create, contain and consume energy responsibly and efficiently. Two of our main offerings are our DC-Hub, which is capable of utilizing any electrical energy source, therefore future-proofing vessels, and our permanent magnet machines, which convert mechanical energy to clean, green electrical power. Used together, these help deliver huge efficiency gains on vessels, reducing fuel burn by up to 35% and cutting maintenance costs by between 10 and 20%,” he added.

Halsebakke pointed out that by spending more in terms of overall project cost, owners can unlock huge business efficiencies over the vessel’s lifetime – potentially providing ROI after a couple of years.

New ordering has suffered a major blow since the beginning of the year due to diminished appetite for newbuilds as owners work to cut costs and preserve liquidity.

Restricted demand growth prospects coupled with overcapacity across shipping markets are clear indicators that the industry must up its efforts when it comes to demolition and retiring old, inefficient fleet.

On the other hand, with the growing pressure for the industry to cut its emissions and decarbonize there is also the need to build greener and more technologically-advanced ships.

The survival of shipbuilding companies is likely to depend on the shipbuilders’ ability to rise to the occasion and speed up the construction of zero-emission ships.

Shipowners are starting to create demand for that, however, yards should move to create that demand, too.

“Smart yards should work to differentiate themselves as pioneers in value, as partners to owners, looking after their business needs, reputations and the environment, rather than simply suppliers that fulfill orders and forget OPEX, moving from one project to the next,” he adds.

The process can be incentivized by the governments as well, by rewarding yards and owners for greener building initiatives.

“Shipbuilding is a business, and businesses need to make money. My argument is the way to do this – a way that truly benefits all of shipping’s myriad stakeholders – is not by cutting costs, but rather by providing value. This is what smart owners are going to look to in the future, and smart yards need to wake up to a new way of working if we’re ever going to enable a truly sustainable maritime industry,” Halsebakke concludes.