Murat Kıran: industrialists and shipbuilder entrepreneurs established Shipbuilders’ Association of Turkey (GISBIR), on 07.07.1971, and, with 40 years of history behind, it is now one of the oldest non-governmental organizations. We have a total of 83 members consist of 62 shipyards and 21 members are real people.
Association has undertaken the mission to develop the national industry in the shipbuilding, to assist our shipyards for taking place in world markets, to make the necessary initiatives for privately owned shipyards to provide state support and incentives for them, to resolve common problems of shipyards with the relevant authorities, to inform the public, to be the spokesperson and represent the Turkish Shipbuilding at national and international organizations, Industry forums and other platforms.
SeaNews: Despite the crisis, the world’s merchant fleet have been growing since 2007, but however, our shipyards in Turkey suffering due to lack of new contracts. . How do you evaluate this situation?
Murat Kıran: In 2008, the global economic crisis began to show itself, and the shipbuilding industry has also been adversely affected, almost all countries have gone to shrink to a considerable extent with the exception of a few countries. Our competing countries, with the support of their government to protect the competitiveness during the crisis, have weathered the crisis better than Turkey. European manufacturing hasshifted significantly to Far East countries.
Since 2008, the vast majority of vessels joined to world fleet were the result of orders received in 2006, 2007 and 2008, partly with delayed deliverance.
Ship orders in the world have declined significantly after the 2008 period.
On the basis of the costs, and in appropriate conditions, certain segments of the Turkish shipbuilding industry are competitive with the world's leading shipbuilders.
Including the EU countries, there is not a single country which does not encourage shipbuilding directly or indirectly, particularly in countries such as South Korea, China, Brazil and Russia, the shipbuilding industry has became an important part of national policies and seeing the crisis as an opportunity in the last 2-3 years, they have enforced new incentive mechanisms.
However, despite all this negativity, our shipyards receive new ship orders especially from European customers, primarily to build special-purpose vessels.
SeaNews: In one of your previous statements you pointed out that Turkey became a brand name in ship repairs. What is the last situation on the orientation, from new buildings to ship repairs? Regarding the new construction, can different building areas be the solution, likewise the Tersan example?
Murat Kıran: Our shipyards, which used to build new ships before 2008, inclined to increase ship repair activities due to contract cancellations and lack of receiving new orders.
New ship order book at the end of 2008 was approximately 4.5 million dwt, while at the end of 2012, this figure declined to 600 thousand dwt. Our shipyards received 8 million DWT in the maintenance and repair activities in 2008 when the global economic crisis began to show it’s effects and same value is even valid for years of 2006 and 2007. However, experiencing great difficulties with receiving new orders, our shipyards received 15 million DWT for repairs in 2012, which clearly means that our shipyards inclined more to the maintenance-repair activities.
Today, eight of our shipyards in Yalova and Tuzla regions build Platform Support Vessels (PSV), fishing vessels, ferries and special purpose vessels such as tugs for Norwegian buyers. We have shipyards which became a brand name in the building of tugboats. In the absence of subsidies, certain segments of the Turkish shipbuilding industry are competitive with the world's leading shipbuilders.
Eco-friendly ships, offshore structures and associated support vessels, military vessels, inland vessels and small tonnage used in cabotage, sophisticated "niche" energy carriers are opportunities for our shipbuilding industry. On the other hand, increase in demand of wind / wave energy platforms, the growing needs in the world for luxury yachts and cruise ships are fields which create opportunities that we can find other important markets in this regard.
SeaNews: In this difficult period, have you received enough support/incentives from Administration? What further could be done?
Murat Kıran: In order to empower our country to compete with the world's shipbuilding industry, there is an ongoing work that is laid out in this issue and amongst significant improvements the Credit Guarantee Fund (CGF) comes forward.
In this way, CGF, by providing guarantees for small and medium-sized businesses, enables them to use bank loans to finance their investments and operations.
The realization of innovative investments, high-tech small enterprises, promoting exports, investments to increase employment and investments for regional development considered as priority issues for CGF guarantees. In this context, ship investments have been included in the scope the Credit Guarantee Fund (CGF).
In addition, with the support and efforts of Ministry of Maritime Transport and Communications, at Tuzla Shipyards Zone where significant majority of Turkish shipyards concentrated, the important problem area with Ministry of Finance regarding rent increases has been solved through a law enforcement, and a model based on annual turnover has been put into effect. This has been a very important achievement for our shipbuilding industry.
Besides, when it was on the rise period, the Shipbuilding Industry has contributed significantly to reduce the current account deficit.
With the re-start of receiving new orders, not only through net exports but also through sales to domestic shipowners and collection of freight revenues in the country will be important contributions again in the future.
In order to reach the 2023 targets of 500 billion dollars of exports and 600 billion dollars of imports totalling in 1 trillion 100 billion dollars of trade volume and taking into account the transport fleet required for this, we believe the Turkish ship and yacht industry should be supported in following areas, similar to the competing countries:
• Sufficient volume of loans and guarantees with convenient conditions,• Support for R & D and innovation in order to build new type of Eco-economic and environment-friendly ships,• Removal of excessive burdens on labor,• Removal of barriers and uncertainty in front of the sector to buy raw materials from international markets under appropriate conditions;• Make due arrangements attracting Turkish shipowners to meet their shipbuilding demands fromTurkish shipyards;• Taking into account that repair and maintenance services are very important gates for exports of goods and services, provide export subsidies for this area as well.
Duration of the lease of the Tuzla Shipyards region ends in 2032 and this situation forming question marks for domestic / foreign investors on the return of their investments. Re-evaluating the duration of the lease by the Ministry of Finance will pave the way of the sector.
SeaNews: Nowadays, the main problem of Turkish Shipbuilding Industry appears to be the financing. What has been done/being done on the solution of this problem?
Murat Kıran: The shipbuilding industry has a funding problem due to the impact of global crisis that the world has been experiencing.
As of today, began to be felt again, this issue could be more effective in the coming period, especially in building of ships of newly received orders.
Due to this reason, as public and private sectors, future-oriented projects need to be developed in order to overcome this downturn before it comes.
Rather than finding a bank to get the loans, our shipyards and ship owners facing huge challenges on the cost of the loans. The credit guarantees required by the banks are increased while due dates are shortened.
Efficiency of Eximbank, which is the Export Credit Bank of Turkey, whether is not at expected levels or is inadequate, and this situation might adversely affect the shipbuilding sector in the future.
In our country, a problem of strategic approach being experienced on the implementations of provided incentives and taking the necessary action in this regard, the shipbuilding sector should be supported in the fields of financing, sales and marketing.
Our country's shipbuilding industry considered in the same basket with other manufacturers in the creation of legislation and incentive policies and sectorial characteristics such as the length of the production period and higher financing requirements not being taken into account, as well as issues such as the absence of financing instruments matching to the characteristics of the shipbuilding industry, poses a major problem in this sector.
As a basis of encouraging ships to be built at Turkish shipyards; the following could be done: definition of a premium system which is "ship" or "product"-oriented, including same elements of supports in the legislation likewise the European Union; provision of appropriate competitive advantage to Turkish shipyards for all new shipbuilding orders Governmental and related organizations, development of a sector-specific financing model taking into account the exclusive features of shipbuilding sector. I believe these will contribute to overcoming the problems.In addition to all this, to forecast the future of the Turkish shipbuilding sector, it is of great importance that a clear point of view by the Government should be demonstrated.
SeaNews: Turkish shipyards are well known as specialist in building chemical/product tankers around 10 thousand DWT. Additionally, they also demonstrated significant improvements in the tugboat construction. There are also shipyards specializing in the construction of feeder container vessels. On the other hand, construction of military ships are improving. What would be your recommendation with regard to our target markets in terms of competitiveness?
Murat Kıran: Our superiority in the competition at the segments you mentioned continues.On the other hand, we see the offshore sector where billions of dollars being invested around the world as a starting point for our shipbuilding industry.
However, lack of reference regarding offshore building makes it difficult for us to enter the market. But, there are serious opportunities at the offshore industry. Offshore shares 7 per cent of the all ongoing construction of ships and platforms which correspond to 26 percent of all turnover, this means that at shipbuilding industry, one of every four liras belong to the offshore market.
Our proposal to enable our shipbuilding industry to take share of the offshore cake is, the creation of an offshore fleet by Turkish Petroleum Corporation TPAO under the leadership of the Ministry of Energy. Here, taking the the relationship between Brazil's Petrobras and Transpetro as an example, an offshore company might be set up and Turkish shipyards might start building platforms, platform support vessels (FPSO, PSV, FSO, Jack-up Rig, etc.) for this company.
In order to implement these projects and to ensure the necessary know-how, a productive partnership need to be developed with the leading world companies.
Because a joint venture (JV) will be key to this work.
Thus, TPAO, similar to Transpetro, will be able to establish an inventory of offshore machinery. Created fleet could be used then for offshore activities of our Ministry of Energy in our region and could be chartered if necessary.
Thus, the shipbuilding industry will change its dimension, and gain reference in this giant market where billions of dollars upturning.
SeaNews: In the shipbuilding industry, domestic contribution is around 50%. That means we are largely dependent on imports. What can be done to increase the proportion of domestic materials and equipment?
Murat Kıran: Shipbuilding supply industry in our country, in parallel with the development of the shipbuilding industry, have improved in recent years, but due to lack of production of some of the products in our country, our shipyards have had to import them from abroad.
Considering that a significant percentage of the value of the ship is constituted by the supply industry, the role of the development of supply industry within the shipbuilding sector could be better understood. The supply industry is in the hands of small businesses across the country and this situation create some challenges in meeting the demands and lack of standardization is leading to a shift to imported products.
Despite the productions such as deck equipment, chain, anchor to be made a very good level, there is no outstanding production of electronic navigational devices due to the existing major manufacturers of the world in this field.
In addition, despite the raw materials such as steel plates and profiles are produced in our country; considering the delivery processes, dimensions, standards and strength, this production can meet only a minor part of the need.
However, in spite of all these challenges, today, around 70% of local content reached in the building of military vessels. This ratio is much over 50% which you mentioned and is around 60-65% for the merchant fleet.
SeaNews: From the point of competitiveness, what is the chance in of Turkey in building main engines, such as the TÜLOMSAŞ example? Is there any incentives by the Government in this regard?
Murat Kıran: In our country, Turkish Locomotive and Engine Industry Inc. (TÜLOMSAŞ) have been producing marine diesel engines since 2011 by the type-approval certificate which is patented and some parts are still being sold to France and Taiwan. In order to increase the domestic contribution of this engine from 80% to 100%, we need to domestically produce the components such as crank, fuel pump and come around with the idea of national diesel engines, Undersecretariat for Defense Industries, Naval Forces should support and coordinate TÜLOMSAŞ as well as i shipbuilding and automotive supplier industries.
However, it should be noted that there are some necessary conditions for the success of this project such as financing conditions, customer satisfaction depending on the success and performance of product after becoming a world brand, capabilities to provide service and spare parts all -or at least some- principal ports of the world.
The competitiveness of domestic main engine to be produced is time-indexed process. But a start on a ground is crucial.
SeaNews: We recently receive news regarding the China's shipbuilding industry is effected by the crisis. South Korean shipyards are a little more fortunate in this sense, as they are inclined towards the production of offshore oil platforms. Renewal of world’s fleet is not an issue of near term but, in the medium and long term, shipyards will have a lot of jobs to do. Do you think that there is an overcapacity in Turkey in the shipbuilding industry?
Murat Kıran: In our country, total number of privately owned ship, yacht building, maintenance and repair yards is 71. Within this number, 27 shipyards are in Tuzla Shipyards Zone in Istanbul, 21 in Yalova region, 8 in Ereğli, 6 in Gulf / Kocaeli region, as well as two pieces in Gallipoli, and one each in Trabzon, Samsun, Izmir, Istanbul, Ankara, Izmir and Sakarya.
In addition, in several cities, primarily at Tuzla Shipyards Zone, there are enterprises with a coastal strip less than 50 meters which carry out maintenance and repair activities under the name of ‘’Boat Building Place" .
However, in our country, accordingly with the planning of the Ministry of Transport, Maritime and Communications (UDH), there are ongoing investments for a total of 54 new shipyards and they are distributed as follows: 20 in Yalova region, two in the province of Adana, 6 in the province of Çanakkale, , 9 in Samsun, 2 within the limits of Balikesir, 1 in Ordu, 3 in Kastamonu, 1 in Trabzon, 1 in Sinop, 4 in Istanbul, 1 in Mersin, 4 in Zonguldak.
Total annual production capacity of these ongoing investment is 3 million dwt, and upon completing these investments the total shipbuilding capacity of Turkey will reach to 7 million DWT per year.
However, it is an undeniable fact that there are problems in numbers and scale of our shipyards.
We have 71 shipyards, more than 480 boat building places, more than 30 floating docks and a total annual capacity of 3.6 million DWT but, if we bring tall of their yard fields together it does not even match a half of the fields of Hyundai Shipyard.
Our shipyards, including existing and these with ongoing investments, are small or medium sized compared with the size and capacity of shipyards in the Far East. This scale, except the disadvantage of not being able to build large-tonnage ships, brings many advantages. We have many shipyards which simultaneously carry out repair and maintenance and new building activities. They identify their own capacities and shift their productions to areas that they are good at.
As I mentioned earlier, our shipyards, with the help of their installed capacity, infrastructure and technology, specialized and well-trained labour force; have got branch segments such as yachts, tug boats, chemical tankers, wooden boats, coasters, and military ships. In addition, they have become a regional power. In repair and maintenance.
All of these elements, enable us for existence and sustain vitality in the worst economic crisis in the world which we feel heavy as a sector.
The Ministry has also raised the issue of the consolidation at shipyards. The consolidation decision will depend on the economic and commercial preferences of the shipyard owners; and can be done with following methods: The use of shared resources; joint purchase of specific sub-product-service-material; jointly bidding on foreign / domestic auctions; setting up consortiums; to be shareholder-to buy overseas shipyards; cooperation of our shipyards with foreigners by joint ventures and partnership; combining shipyards into large-scale enterprises; and developing a culture of co-working with other stakeholders in the sector.
Although the merger will be provided with the space and capacity building, will not provide an additional opportunity for this area of activity which –yet sustainable- mentioned above. On the other hand, if efficiency required by the increased capacity can be met by increase in demand, there will be a reduction in operating costs. The major role for realization of this issue belongs to the leadership by our Ministry through regulations.
Shrinking demand, rising costs initiated the process of consolidation at powerful industries in the world. Japan is the best example of it.
Today looking at our sector we see that there is not an inclination towards formation of domestic or foreign entities required for the correct structure of capital and the sector is not enthusiastic enough about this issue.
However, from the past to date, there are examples of co-operation and merger between our shipyards.
Purchasing of one shipyard adjacent to another, combining of several shipyards to carry out joint activities under the new formation, using of another shipyard’s dock/berth; using other shipyard for production are realized examples from sector and the results are considered positive in terms of the parties.
However, it is also clear that the determinant parameter of the consolidation will be the needs and trade preferences.
SeaNews: Is the distribution of existing shipbuilding facilities efficient across the country?
Murat Kıran: After specifying the distribution of our shipyards of existing and on-going investments above; being aware of the importance of the Mediterranean region, we observe that it has become a necessity to build shipyards with strong infrastructure for maintenance and repair in the region.
But, taking into account the wave situation, meteorological and topographical conditions, shipyards protected with a breakwater brings a very serious investment costs.
Therefore, contribution of Government to breakwater constructions will encourage investors to invest in this area.
SeaNews: There are different views on the renewal project of coaster fleet; some finds it ‘useful’ while some others say that ‘coaster fleet dying due to insufficient demand’. How would you comment on this issue?
Murat Kıran: When analysing the current state of the Turkish coaster fleet, first identification would be that the fleet is extremely old.
Existing fleet consists of approximately 750 vessels and 300 vessels are over 30 years and more than 500 ships are over the age of 20. The average age of the whole fleet is 25.2
Looking at 0-5 age group of 89 vessels, it can be seen that there was some new ship building activities.
However, evaluating the total carrying capacity, approximately 2 million DWT of the total capacity of Turkish coaster fleet is over the age of 20.
The Black Sea, the Mediterranean and European trade are usually carried out by small-tonnage vessels.
Regional dynamics (amount of the transaction, port infrastructure and capacity, and so on.) Is not suitable for larger tonnages.
An average of 184 million tons of cargo, transported by a fleet of 11.4 million dwt.
The existing fleet capacity is 11.4 million DWT with approximately 2,300 ships.
Fleet has been shrinking since 2009.
Fleet tonnage decreased by nearly 18 percent between 2009-2011.
400 ships (1.65 million DWT) sent to be scrapped, to laid-up, removed or sold to do business at other regions.
Depending on the economic and political stability in the region a rapid rise in demand for vesses is probable.
Judging on the overall appearance:
Unlike larger tonnage (handysize and above) there is no fear of overcapacity for coaster fleet.
Intensive scrapping rate constantly narrowing the size of the fleet.
There is demand from rapidly emerging North and West Africa.
There are growing economies in the East led by Russia, Turkey and Israel.
More than 500 ships corresponding to approximately 2 million DWT are over the age of 20 and 300 of them are also over the age of 30 years.
Given the current state of the coaster fleet within the context of the balance of supply and demand, provided the appropriate building requirements are met, it is a platform which is able to attract the shipping companies and be built in series by the shipyards while having potential of finding suitable conditions as joins the fleet.
As the first phase, implementing regulations for construction of the needed 300 units at Turkish shipyards, will allow our shipyards to survive which experience the most severe effects of the economic crisis in the world today.
Providing additional support for the shipbuilding industry in proportion to public resources is an issue we focus closely and attribute great importance.
One of them, and foremost, is the the issue of provision of a support by the purchase of the steel plates through ErRDEMİR, and this a model which will provide a significant impetus to the sector and will provide a significant return on our state.
This support, when provided, will primarily to sustain the existence of shipbuilding industry which is the one of the leading sectors in our country; ‘Renewal of Coaster Fleet’ issue, which has been on the agenda of whole maritime sector through the years, will be addressed, and also will bring many positive results including the following;
- The growth of employment, preventing the loss of skilled labor,- Foreign currency input and contribute to reducing the current account deficit in this context,- $ 500 billion in 2023 across the country for the export and import of a total of $ 1 trillion or so needed for the volume of trade as contribute to meeting the need for transport fleet.In the case of vitalizing the project of renewal of Turkish Coaster fleet at our country's shipyards, much more than the provided support will come in return to our State within 5 years’ period.
The added value to economy by the employment created in the shipyards is not included in this return.In addition, contribution of these new ships to economy of the country and in the case of a compulsory hoisting of Turkish Flag, employment of Turkish crew in these ships will be plus gains in front of us.
As GISBIR, we submitted our report on the matter to Mr. Minister. We know that Mr. Minister, himself pays close attention to this issue, and in the effort to find a solution.
SeaNews: How does GISBIR approach the shipbreaking issue? Is there ship scrappers in your association?
Murat Kıran: Ship recycling, no doubt, is the most "environmentally friendly" way for disposal of vessels which reached the end of business life.
Almost any material onboard a ship can be recycled or re-used or overhauled.
In essence,it is a branch of industry which includes all of the processes of on a single ship; reducing the waste at it’s source as in the conventional waste hierarchy, reuse, recycling, energy recovery and disposal.
Despite the indisputable benefits, ship recycling industry faces many challenges to solve such as environmental and safety issues due to the ever increasing public awareness.
Turkey, a country which has the smallest share of the five largest shipbreaking country, has a capacity of recycling which is more than the rest of the countries if these 5 is excluded.
Ship dismantling activities were taken into legal framework by Ship Recycling Regulations, which was enacted in 1986.
Sectoral activities began in the 1950s on the Golden Horn, in 2001, the Association of Ship Recycling moved to Aliağa. The association is not a member of our Association.
SeaNews: Is there a lack in terms of promotion of Turkish shipbuilding abroad? We observe the contribution of Government for participation to trade fairs and for reaching the consumer, for example, the Ministry of Economy forming a delegation for participation at Neva 2013 fair in Russia. What other work is being done on these issues?
Murat Kıran: I don’t think that Turkish shipbuilding industry experience a promotional problem abroad, but, ensuring the continuity and importance of Business Development and Marketing in today's business world, is an indispensable requirement.
Other than the attempts of individual firms, Turkish Shipbuilders’ Association (GISBIR) and other agencies participates in meetings, trade fairs and conferences in every corner of the world. We support these activities and provide participation at all levels.
SeaNews:The MOL Comfort accident revealed the questions of structural safety in building of large container ships where the crazy TEU race continues. In this regard, is there any ongoing study or participation to studies carried out by your Organization?
Murat Kıran: We're now watching the press that there is a study jointly carried out by Mitsubishi shipyard that built the ship and Class NK, the class society of the ship MOL Comfort which split in two on June 17 in the Indian Ocean for a yet unknown reason.
The shipowner declared that the other six sister ships has been withdrawn from the service until finding out the cause of the accident and necessary retrofitting work is done.
I would like to declare that we are ready to provide any technical support upon the demand from our Administration .
SeaNews: Dear Mr. Kıran; we would lik to thank you very much for allocating your time for SeaNews. Is there anything you would like to add?
Murat Kıran: Thank you for giving us this opportunity to wish you all the best for the publication.