The Turkish shipping and shipbuilding industry is in a bullish mood. Backed by a buoyant market, they are investing and expanding their businesses and fast becoming a major player on the international scene.
Turkish shipping is sitting pretty at present as is the industry generally. Shipowners are earning well and keen to expand their business but at the same time focusing on clearly defined core activities weighs a lot in future plans.
Dunya shipping, the Istanbul-based tanker company, currently operates a fleet of 12 oil/product tankers and, judging by how chairman and president Suay Umut puts it, the company is unlikely to diversify into new trades “because we prefer to stick to the tanker business; it’s more demanding and requires high technical expertise which not all owners have resources to handle.”
Formally known as Dunya Denizcilik ve Ticaret AS, Dunya Shipping has 9 oil tankers slated for delivery from Korean and Turkish shipyards between now and the end of 2010. When delivered they will bring the total deadweight (dwt) under Dunya’s management to in excess of 1 million tonnes; a sizeable and modern fleet (average age less than two years) in the international product tanker sector.
Commitment to quality
Through Dunya’s ongoing strategic partnership with the leading Swedish tanker operator, Brostrom, the company’s tankers regularly perform voyages for the likes of Chevron, Shell, BP, ExxonMobil and Total, “among the most demanding customers in the business,” says Suay Umut and adds, “This is further evidence of our commitment to quality as well as to our international outlook.”
Further growth is part of the company’s policy but to an extent this depends on how the market develops. “It is our tradition to study everything and evaluate all the time,” says Suay Umut. “At present there is some uncertainty in the market due to the future supply-demand situation, freight rates, and increasing steel prices. We are therefore content with the number of new vessels we already have on order.”
Commenting on the shipping industry’s bull run since 2003, Mr. Umut says “The buoyant market has allowed Turkish owners to invest heavily. Last year alone almost 10m dwt were ordered. This represents a significant figure and also reflects the fact that owners no longer have to seek finance abroad since the local banks are showing interest in the domestic shipping sector as never before.”
Geden Lines, another Istanbul-based shipping major, has grabbed the headlines more than once in the recent past. It has a bumper 76 vessels on order, the majority of which are to be built in Korea and China. Its expansion plans are to strengthen its tanker fleet which currently stands at 18 vessels, despite the fact that is the dry bulk market that is booming at present.
“For tankers the spot rates are particularly weak compared to the dry bulk,” says Orhan Karademir, Geden’s fleet manager. “That said, we believe that the tanker asset values will remain strong in spite of earnings as any geopolitical supply chain disruption could very quickly add to tanker earnings.”
The deals that both Dunya and Geden have inked in over the past 12 months reflect the general bullish mood of the Turkish shipping industry. However, both companies acknowledge that the shipowners are facing challenges. An over-valued lira, rising running costs and social security contributions for Turkish crews are forcing about half the 15m dwt.
Turkish ownership to migrate to foreign flags to offset these. In addition, there’s the lack of seafarers and, in Geden’s case, this has led the company to use third-party ship crewing management offices to tackle the shortage.
“No doubt in the near future things related to the human factor will dramatically change, says Orhan Karademir and adds, “Continuous training is very much on our agenda because we will know that a lack of seafarers is a serious problem which could directly affect safety and environmental protection.”
Orhan Karademir also emphasized the importance of quality operations and would welcome the emergence of a two-tier market whereby good quality translates to higher earnings, as this would drive the less competent operators out of the market.
“It’s a bit like when you choose your airline. You feel safe when you know that they take quality and safety seriously. You don’t take another airline which is sub-standard just because it’s 10% cheaper than the good one,” comments Orhan Karademir.
The Turkish shipbuilding industry is also enjoying busy times. It currently has a significant order book comprising some 240 ships of about 3m dwt in total. The yards are building most vessel types, including chemical/product carriers, container and dry cargo ships ranging from 3.000 dwt to 180.000 dwt. Highlights would have to include over 180 orders in the chemical tanker niche.
“The market is particularly buoyant at the moment,” says Mehmet Taylan, vice president of the Turkish Shipbuilders’ Association and board member of the Celik Tekne shipyard.
“Turkish yards are winning more export newbuilding orders and moving up in vessel size and complexity, thanks to the strong demand for new ships and lack of capacity at Far Eastern yards.”
Rapid expansion mode
According to Mehmet Taylan, Turkey currently has 53 shipyards and a large percentage of them are booked till 2010. In addition, there are over 60 new yards under construction, mainly in Yalova, Mersin, on the Black Sea coast, and the Agean Sea coast just north of Izmir.
“We’re talking about 6.5m dwt order book with a total value of USD 10 billion making Turkey the fourth largest shipbuilding nation in the world,” says Mehmet Taylan. “The industry is very bullish and we expect the busy times time to last until 2010-11.”
The Celik Tekne yard in Tuzla is also experiencing busy times. The yard has three slipways and can build vessels up to 30.000 dwt. It is contracted to build 14 vessels due for delivery between 2007-10, including the two tankers for Dunya.
“We’re on the right track to strengthen our position for top-quality special-purpose shipbuilding and at the same time also retain an effective presence in standard shipbuilding,” says Mehmet Taylan and adds, “Our ability to custom-build vessels will ensure we’re competitive in the future.”
Prospects are indeed looking up for both Turkish shipowners and yards. As Mehmet Taylan says: “It’s a very challenging market but the potential is there. We are building for the future – Turkey’s future.”