Singapore's shipyards are once again humming with activity. In fact 4,000 jobs were created on the docks last year--even as Singapore shed over 25,000 positions in such industries as chipmaking, computer manufacturing, and retailing. Orders at the nation's 30 shipyards are coming in at a rapid pace. In 2001, they grew 45% over the previous year. And Heng Chiang Gnee, president of the Association of Singapore Marine Industries, reckons that total revenues could reach $2.2 billion, up from $1.5 billion in 2000. That would be the best performance since 1998 for a sector that peaked in 1991 and was considered the very embodiment of a "sunset industry."
The oil industry is giving Singapore shipyards plenty of business, too. Recent discoveries of deep-sea wells have pushed up demand for offshore storage platforms. Rather than build these from scratch, which takes 18 months, oil majors are opting to convert tankers for the purpose, which takes just a year. Singapore's shipyards have a reputation for getting the job done on time. Moreover, Singapore routinely handles more complex assignments, such as building ships that lay telecom cable, that Chinese yards are not equipped to handle.
The question is whether the surge of orders is a blip or indicates a new lease on life for Singapore's shipyards. Some fear that when demand for Asian exports recovers, shipping lines will get back on course and the yards will empty out fast. Conversely, if global trade doesn't recover as soon as expected, shipping companies could cut their losses by scrapping older vessels--a measure that already has increased business at scrap yards in India, Bangladesh, and China. And, of course, the demand for tanker conversions will likely falter as petroleum companies take a hit from lower oil prices and cut their spending.
Much depends on Singapore's ability to make its shipyards more competitive. The trouble is that the 10 biggest operations are owned by the government through two conglomerates, Keppel Corp. and Sembcorp Industries. Since they both report to the same controlling shareholder, Temasek Holdings, they are not about to undercut one another on price. That's why Keppel and Sembcorp are keen to merge and consolidate some operations; talks are expected to resume soon.