Marine

Building BIG Ships

Tim Colton
Senior Advisor, Shipbuilding

February 10, 2006

 Contents

1. The Shipbuilding Industry

2. Building BIG Ships
3. The Shipbuilding Process
4. Engineering, Planning and Procurement
5. Prefabrication
6. Block Assembly
7. Hull Erection
8. Testing and Completion
9. Summary

February 10, 2006 Slide 2 of 37

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 1 – Shipbuilding Basics
• There are ~40,000 oceangoing 18,000
cargo ships in the world fleet. 40,000
• Ships are designed to last 30 24,000
years, so ~3.3% of this fleet
should be replaced every year. 7,500
26,500
• In practice, ships last longer than Cargo Passenger
30 years and only ~2.0% of the Naval
Working
Fishing

fleet is replaced every year.

• To keep pace with world trade, the 45

40
capacity of the cargo fleet needs 35

to grow by ~2.8% a year. 30

million GT
• In practice, ships get bigger and 25
20
more efficient, and only ~2.0% of 15
the fleet is added every year. 10

• 4% of 40,000 is 1,600 ships a 5

0
year: the number actually built 1964

1968

1972

1976

1980

1984
1988

1992

1996

2000

2004
fluctuates in a 30-year cycle.
February 10, 2006 Slide 3 of 37
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 1 – The Main Market Sectors
LNG Carriers Bulkers

Tankers Containerships

February 10, 2006 Slide 4 of 37

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 1 – The Main Market Sectors
100%
90%
80%
70% All Other
60% Containerships
50% Bulkers
40% Other Tankers
30% LNG Carriers
20%
10%
0%
# GT bn$

• “All Other” includes car carriers, ferries, reefer ships and

multi-purpose cargo ships, which are small compared to the
other types but are more valuable on a per-ton basis.
• LNG carriers are a small sector of the market in terms of # of
ships and GT but are much more valuable on a per-ton basis.
February 10, 2006 Slide 5 of 37
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 1 – Market Shares
100%
90%
80%
70%
All Other
60%
China
50%
Japan
40%
Korea
30%
20%
10%
0%
# GT CGT DWT

• 72% of the world cargo fleet (by # of ships) but 90% (by dwt)
is built in the Far East.
• CGTs are “compensated” GTs – i.e., GTs multiplied by a
factor that reflects relative complexity.
• “All Other” is mostly Europe, Brazil and India.

February 10, 2006 Slide 6 of 37

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 2 – Building BIG Ships
6,000

• There is a noticeable break 5,000

in ship size distribution that 4,000

# of Ships
corresponds to the breadth of 3,000

2,000
the Panama Canal.
• There is a corresponding
1,000

0
break in the structure of the

60+
20
22
24
26
28
30
32
34
36
38
40
42
44
46
48
50
52
54
56
58
shipbuilding industry. Beam (m eters)

42
• The yards that build BIG
ships don’t build SMALL ships
and vice versa.
• There are now over 600 219
352
yards building commercial
vessels, of which over 200
build “Panamax” ships but Big Panamax Small
only 42 build BIG ships.

February 10, 2006 Slide 7 of 37

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 2 – The BIG-Ship Shipbuilders
Japan (18) Korea (5) China (6) Europe (9) Other (4)

IHI Marine (2) Aker – Turku Avondale

Daewoo Dalian
Imabari (2) (Finland) (U.S.)
Kawasaki Atlantique
Hanjin Hudong NASSCO (U.S.)
Koyo Dockyard (France)
Mitsubishi Fincantieri Newport News
Hyundai Jiangnan
Mitsui (Italy) (3) (U.S.)
Namura China SB
Samho Liaoning IZAR (Spain)
Oshima (Taiwan)
Sanoyas Meyer Werft
Samsung Nantong
Sasebo (Germany)
Sumitomo Odense
Waigaoqiao
Tsuneishi (2) (Denmark)
Brodosplit
Universal (3)
(Croatia)

February 10, 2006 Slide 8 of 37

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 2 – The Really BIG Shipbuilders
Shipbuilder Hyundai Samsung Daewoo

Revenues (2005) $16.1 billion $5.5 billion $4.8 billion

Net Profit $188 million $73 million $8 million

Backlog $25 billion $18 billion $16 billion

Employees 25,000 12,000 10,000

Subcontractors 10,000 8,000 10,000

Ships/Year ~80 ~45 ~45

# of Docks/Ways 9 4 5

Biggest Dock 640m x 92m 640m x 98m 529m x 131m

February 10, 2006 Slide 9 of 37

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 2 – Hyundai Heavy Industries

February 10, 2006 Slide 10 of 37

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 2 – Daewoo Shipbuilding

February 10, 2006 Slide 11 of 37

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 2 – Samsung Heavy Industries

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 2 – Current Order Books
Hyundai Heavy Industries (Ulsan)
Vessel Type 2006 2007 2008 2009 2010
LNG Carriers 2 7 9 2 2
LPG Carriers 4 10 22 1
Tankers 15 17 6
Containerships 51 45 40
Other 3 2
Totals 75 79 79 3 2
Daewoo Shipbuilding & Marine Engineering (Geoje)
Vessel Type 2006 2007 2008 2009 2010
LNG Carriers 7 10 13 4
LPG Carriers 5 5 4 2
Tankers 13 10 9 2
Containerships 9 8 8 2
Other 7 7 5
Totals 41 40 39 10
Samsung Heavy Industries (Geoje)
Vessel Type 2006 2007 2008 2009 2010
LNG Carriers 7 9 12 6
LPG Carriers
Tankers 16 15 13 1
Containerships 19 17 13 1
Other 2 4 2
Totals 44 45 40 8

February 10, 2006 Slide 13 of 37

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 3 – The Shipbuilding Process
• Shipbuilding is an assembly process, involving hundreds of
thousands of individually prefabricated parts and items of
machinery, equipment and outfit. The secret of efficient
shipbuilding lies in how efficiently we can put them all together.

Milestone Event Construction Activity

1 Execute Contract
Preparation for production
2 Cut Steel
Prefabrication and block assembly
3 Lay Keel
Hull erection
4 Float Out
Completion and testing
5 Deliver

February 10, 2006 Slide 14 of 37

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 3 – Shipbuilding Technology
• Computers – allow detailed definition of every part, integrated
purchasing, detailed planning and scheduling of every
construction activity, resource levelling
• Precision steel cutting – results in better fit, robotic welding,
reduction in rework, improved quality
• Pre-outfitting – prefabricating outfit material in a shop and
fitting it on a hull block in another shop is more than 3x more
efficient than fitting it piece by piece on board ship and more
than 9x more efficient than fitting it on a ship that is afloat
• Goliath cranes – building a ship in 900-ton blocks is a lot more
efficient than building it in 60-ton blocks
• Megadocks – building five ships at a time in one dock is a lot
more efficient than building one ship in each of five docks

February 10, 2006 Slide 15 of 37

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 4 – Preparation for Production

• The biggest difference between shipbuilding today and

shipbuilding 30 years ago is that today we spend a much greater
proportion of our total effort preparing for production.
• As a result, modern shipbuilders take much less time to build a
single ship: as a result, they produce more ships from a single
building position than old-style shipbuilders.
• For example, a Korean or Japanese shipbuilder can deliver as
many as ten big ships a year from a single building position.
• As a result, modern shipbuilders get a much higher return on
their investment in fixed assets and can spread their fixed costs
over a much larger volume of business.

February 10, 2006 Slide 16 of 37

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 4 – Preparation for Production
• Design and engineering – two steps:
– Functional design is the detailed specification of all
structure, material and equipment, meeting all the relevant
regulatory requirements
– Production engineering is the development of all the detailed
drawings, sketches, instructions and other documentation
needed by the shipyard to build the ship.
• Production planning – three steps:
– Build strategy: how are we going to build this ship?
– Scheduling: when are we going to build it?
– Resource allocation: what manpower/facilities do we need?
• Procurement – three main areas:
– Major and long-lead-time machinery and equipment
– Commodity materials, such as steel, pipe, cable and paint
– Subcontractors

February 10, 2006 Slide 17 of 37

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 5 – Prefabrication

• Hull Steel:
– JIT delivery of plates and structural shapes to a storage area
– Blasting and painting with a primer
– Cutting, marking, shaping, labeling
– Manufacture of two-dimensional subassemblies (panels)
• Outfit:
– JIT delivery of pipe and other material to warehouses
– Cutting, marking, shaping, labeling, palletization
– JIT delivery to the appropriate work stations for attachment to
or installation on hull structure

February 10, 2006 Slide 18 of 37

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 5 – Prefabrication of Plates

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 5 – Prefabrication of Flat Panels

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 5 – Prefabrication of Outfit

February 10, 2006 Slide 21 of 37

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 6 – Block Assembly
• Flat-Panel Blocks:
– Three-dimensional assemblies of flat panels
– Pre-outfitted: everything that goes into them – piping, vent
ducting, cable trays - is installed in the shop
– Fully painted except at the butts
• Curved-Panel Blocks:
– Three-dimensional assemblies of both flat and curved
panels – involving the complex shape of the hull structure
fore and aft and requiring computer-set jigs
– The processes are the same as for flat-panel blocks but are
much more complex
• Equipment Modules:
– Three-dimensional, self-supporting, self-erecting assemblies
of equipment, mounted on foundations or temporary skids
– Everything in a module is tested and operational: only the
external connections remain
February 10, 2006 Slide 22 of 37
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 6 – Flat-Panel Blocks

February 10, 2006 Slide 23 of 37

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 6 – Curved-Panel Blocks

February 10, 2006 Slide 24 of 37

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 6 – Curved-Panel Blocks

February 10, 2006 Slide 25 of 37

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 6 – Equipment Modules

February 10, 2006 Slide 26 of 37

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 6 – Grand Blocks
• Blocks may be combined into “grand blocks” that weigh as much as
3,000 tons, especially if they are to be assembled in a floating dock.

GM11
GM12
GB17

GF11
GEC51(C)
GB21
★
GB19

GB15

GB13
GB11
GE12

February 10, 2006 Slide 27 of 37

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 6 – Grand Blocks

February 10, 2006 Slide 28 of 37

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 7 – Hull Erection
• The “big three” Koreans each have at least one “megadock” in
which five or six ships can be erected simultaneously: “goliath”
cranes span the dock and the area alongside it.
• As the blocks are set in place and aligned, the butts between
them are welded up and the tanks and other internal spaces
are inspected and tested.
• The dock is flooded about once every five or six weeks. Two
or three of the ships in the dock are then floated for the first
time and their hull integrity is checked. The other two or three,
which were floated the last time the dock was flooded, are
towed out and moored at a pier. The dock is then pumped dry
and erection of two or three more ships is started.
• In this way, one megadock can produce 20 to 25 ships a year.
• Single ships are also erected in smaller graving docks, in
floating docks, and on land-level facilities.

February 10, 2006 Slide 29 of 37

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 7 – Hull Erection in a Dock

February 10, 2006 Slide 30 of 37

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 7 – Hull Erection in a Dock

February 10, 2006 Slide 31 of 37

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 7 – Hull Erection in a Floater

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 7 – Hull Erection on a Slab

• Erecting a ship on a land-level facility.

February 10, 2006 Slide 33 of 37

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 8 – Completion and Testing
• Most big ships – tankers, bulkers and containerships – are 90%
to 95% complete when floated out of the dock.
• Final outfitting and system testing is conducted once the ship is
afloat and at a pier.
• Trials are then carried out to confirm each ship’s performance
characteristics: a naming ceremony usually precedes delivery.
• LNG carriers are different: they are only 60% to 65% complete
when floated out of the dock, because the cargo containment
system cannot be installed until the hull is complete.
• Final outfitting and system testing of LNG carriers is conducted
in parallel with the installation of the cargo containment system.
• Trials of LNG carriers include rigorous testing of the cargo
system with actual LNG, in addition to all the standard
procedures.

February 10, 2006 Slide 34 of 37

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 8 – Completion and Testing
Typical Schedule for LNGCs

Preparation for Fabrication and Hull Com pletion

Production Block Assem bly Erection and Testing

Typical Schedule for Other Big Ships

Preparation for Fabrication and Hull Com pletion

Production Block Assem bly Erection and Testing

Months
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

• Most big cargo ships can be built in 16 months or even less, of

which actual construction requires only about 10 months.
• Because of the containment system, an LNGC requires five times
the time in the water that is needed for other big ships.
• As a result, the shipyard needs a lot of expensive pier space.

February 10, 2006 Slide 35 of 37

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 8 – A Membrane-Type LNG Tank

February 10, 2006 Slide 36 of 37

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 9 – Summary
• Technological change has transformed shipbuilding from a project-
oriented, one-off construction process to a mass-production
manufacturing process. Ships are now built in factories.
• This is particularly true of large cargo ships – crude carriers, dry bulk
carriers and containerships – the designs of which are well suited to
standardization and repetitive work.
• Gas carriers are a bit different: they are more complex, labor-
intensive and time-consuming, and hence more expensive. So are
large offshore vessels such as drill ships and FPSOs, passenger
ships and naval vessels.
• The future? Korea will continue to dominate the market but will shift
its emphasis to higher-value ships as China takes an increasing
share of the lower-value ships. Japan still has a large market share
but is losing ground to Korea and China. Nowhere else matters.

February 10, 2006 Slide 37 of 37

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