In recent times, the ship repair and maintenance industry has gained momentum owing to its essentiality in maritime operations, along with rising operation of ships for international trade and travel across the world. However, this has led to making the ship repair business models more complex by introducing major changes in the terms of economics, which are greatly impacted by competition in the ship repair and maintenance services market.
Extensive Use of Old Marine Vessels Increase Requirements
The average age profile of maritime fleets is a crucial factor for the accurate projection of workloads at ship repair projects, which is essential in terms of financial and technological resources required by the industry to fulfill end-user demands. This is because older ships are affected more by wear and tear, and repair and maintenance procedures need to be carried out more often.
Currently, the turnover of ship repair operations is witnessing a strong demand owing to the continued use of old vessels by major maritime fleet owners. On the other hand, this turnover rate is expected to decrease rapidly in the coming years owing to modernization initiatives, and the resultant reduced average age of ships across the globe.
Developing Countries Witness High Prevalence of Ship Repair Businesses
As the maritime trade and transport industries have been witnessing rapid growth since the past decade, demand for repair and maintenance services has also grown across the world.
The prices of ship repairing services is largely dependent on costs of labor and equipment, which varies greatly from place to place. Thereby, expenses related to operations in the repair and maintenance industry is characterized by labor costs. Prices for availing ship repairing services has significantly fallen in developing countries, such as China, India, and Indonesia among others, owing to significantly lower costs of acquiring and using manpower.
This is one of the major factors that are bolstering demand for ship repair and maintenance services in these regions as it can help end-users to optimize operational profits in an increasingly competitive global maritime market. In addition, these countries are creating a favorable growth environment for ship repair businesses owing to relatively relaxed environment regulations, which allow easier operations at lower costs.
Fluctuations in Freight Transport Costs Restrict Demand
Supply and demand in the ship repair and maintenance services is also greatly influenced by the total cost of freight transport. The freight rate usually increases with a shortage in carrying capacities, which encourages ship owners to increase maritime transport resources. On the other hand, overcapacity results in reduced prices.
These regular fluctuations have a significant impact on the ship repairing and maintenance industry owing to increased reluctance of ship owners to carry out repair and maintenance procedures when freight rates change. This can be attributed to either low repair budgets when freight rates are low, or the presence of other profitable options, when freight rates are up.
Rising Tariffs and Prices of Steel Raw Materials Create Manufacturing Challenge
The profitability of the ship repair and maintenance services market is projected to be directly impacted by the ease of availability and the prices of steel in the region. At present, the prices of steel are currently displaying a steady upwards trend in most areas of the world, which is expected to continue for the near future. This can be attributed to increased tariffs and trade battles between countries such as the US and China.
This increase in steel prices is anticipated to restrict the profitability of ship repair and maintenance operations in the coming years, limiting overall market growth.
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