Wart­sila to gain larger foothold in ris­ing mar­ket

China Daily (Hong Kong) - - BUSINESS COMPANIES - By ZHONG NAN zhong­nan@chi­nadaily.com.cn

Wart­sila Corp, one of the world’s largest ship power sup­pli­ers and man­u­fac­tur­ers by rev­enue, is hop­ing to turn China into its big­gest mar­ket by adding more manufacturing ca­pac­ity in the coun­try next year.

Eage r to gain a larger foothold in the na­tion’s lu­cra­tive ship­build­ing mar­ket this year, the Fin­nish com­pany will open a joint venture — Wart­sila Yuchai En­gine Co Ltd — in the mid­dle of 2014, to man­u­fac­ture medium-speed ma­rine en­gines to serve the in­creas­ingly dom­i­nant Chi­nese ship­build­ing in­dus­try in Zhuhai, in South China’s Guang­dong prov­ince.

Wart­sila and Yuchai Ma­rine Power Co Ltd, a sub­sidiary of Guangxi Yuchai Group, each owns half of the new com­pany’s shares. It will fo­cus on manufacturing and test­ing a se­ries of medium speed en­gines. The value of Wart­sila’s in­vest­ment in this joint venture is 17 mil­lion eu­ros ($23.5 mil­lion).

Jaakko Eskola, se­nior ex­ec­u­tive vice-pres­i­dent of Wart­sila, said the joint venture is a con­crete step in Wart­sila’s global strat­egy to cap­i­tal­ize on sig­nif­i­cant growth op­por­tu­ni­ties and in­crease its fo­cus on the off­shore and spe­cial seg­ments in China, the world’s largest ship­build­ing coun­try.

In­deed, China’s newly re­ceived or­ders hit 46.44 mil­lion dead­weight tons in the first 10 months of this year, about 46.4 per­cent of the global mar­ket share. On­go­ing or­ders to­taled 118 mil­lion dead­weight tons, 45.4 per­cent of the in­dus­try’s share. The coun­try com­pleted 34.8 mil­lion dead­weight tons in the mean­time, ac­cord­ing to China’s Min­istry of In­dus­try and In­for­ma­tion Tech­nol­ogy.

“Surg­ing ship or­ders mean more Chi­nese and in­ter­na­tional ship own­ers. We have been look­ing for this op­por­tu­nity for many years,” Eskola said. “China is build­ing more off­shore spe­cial­ized ves­sels and mer­chant ships. The num­ber of Chi­nese ship own­ers is also grow­ing faster than be­fore.”

Af­fected by fac­tors such as over­ca­pac­ity of global ship­ping and ship­build­ing mar­kets, plus Chi­nese ship­yards’ low-end mar­ket com­pe­ti­tion with Ja­pan and South Korea, the ship prices of bulk and con­tainer ves­sels com­pared with 2008, have dropped 40 and 30 per­cent this year, ac­cord­ing to the China As­so­ci­a­tion of the Na­tional Ship­build­ing In­dus­try in Bei­jing.

For in­stance, a 30,000-ton bulk car­rier could have been sold for more than 300 mil­lion yuan ($49 mil­lion) in 2008 in any ship­yard in Nan­tong, in East China’s Jiangsu prov­ince, but its price has now dropped to 160 mil­lion yuan. There­fore, many ship­ping com­pa­nies from both China and abroad be­gan to ex­pand their fleet by plac­ing or­ders from Chi­nese ship­yards. They ex­pect the mar­ket to re­cover in 2015.

Dong Li­wan, a pro­fes­sor at Shang­hai Mar­itime Univer­sity, said most mer­chant ships pro­duced in China use lowend me­chan­i­cal trans­mis­sions and are pro­pelled by an en­gine spin­ning a pro­pel­ler.

“They usu­ally use steam en­gines, mul­ti­ple-stroke diesel en­gines or gas tur­bine en­gines,” said Dong. “It is time for Chi­nese ship­yards to meet the chal­lenges be­ing posed by both fierce com­pe­ti­tion with South Korea and Ja­pan and tough en­vi­ron­men­tal reg­u­la­tions.”

The ma­jor­ity of con­tainer or bulk ves­sels man­u­fac­tured by ship­yards from de­vel­oped and South Korean mar­kets has al­ready adopted the tech­nolo­gies such as dual-fuel and liq­ue­fied nat­u­ral gas-pow­ered so­lu­tions, or in­te­grated elec­tric propul­sion tech­nol­ogy, which can ef­fec­tivly cut emis­sions, fuel use and oper­a­tional costs.

“Wart­sila re­ally sees the growth in the ma­rine mar­ket and China’s de­mand for more en­ergy-ef­fi­cient ves­sels. The own­ers de­mand fuel flex­i­bil­ity, but they also need to have en­vi­ron­men­tal so­lu­tions to sat­isfy en­vi­ron­men­tal reg­u­la­tions which are get­ting stricter these days,” Eskola said.

The com­pany in­tro­duced its new two-stroke dual-fuel en­gine tech­nol­ogy in November to of­fer the flex­i­bil­ity much sought af­ter by ship own­ers and op­er­a­tors, al­low­ing them to switch be­tween gas and resid­ual or dis­til­late fu­els, de­pend­ing upon price and bunker­ing avail­abil­ity.

In 2012, Wart­sila’s net sales to­taled 4.7 bil­lion eu­ros with 18,900 em­ploy­ees. The com­pany has op­er­a­tions in nearly 170 lo­ca­tions in 70 coun­tries around the world. It cur­rently has more than 2,000 em­ploy­ees work­ing in two wholly owned plants and five joint ven­tures in China. The com­pany plans to con­tinue to in­crease its lo­cal manufacturing ca­pac­ity in China over the next five years.

Eskola be­lieves that the big­gest dif­fer­ence be­tween Chi­nese and South Korean ship­yards is the prod­uct re­quire­ment com­ing from ship­yards. The ship­yards in South Korea have al­ready been well es­tab­lished in the off­shore sec­tor and they know how to build the most so­phis­ti­cated ves­sels, said Eskola.

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