DETERMINED JAPANESE PLAN FOR LONG-TERM

While the merchant vessel order intake by Japanese yards for 2021 was, at around 16.3m dwt, on a par with that of the preceding year, the indications at this early stage of 2023 are that 2022 brought a pronounced decline in new contract volume, aggravated by a much reduced flow of new bulker contracts.

By David Tinsley

8 Sunflower Kurenai signals a seminal stage in national fleet development, as the first large Japanese ferry with LNG dual-fuel propulsion

Moreover, and notwithstanding the pre-eminence of Japanese shipping in the LNG carrier sector, all Japanese investment in a year of record ordering went to South Korean and Chinese builders.

Clearly, Japanese shipbuilders have not been able to fully benefit from the rapid devaluation of the yen, which would traditionally have been a boost to shipbuilders dealing on US dollar-denominated newbuild contractual terms, and incurring their principal outgoings in yen, as concerns labour and domestically-sourced steel, ships’ equipment and machinery.

In fact, the national currency reached a 30-year low against the ‘greenback’ during 2022. Business sources consider that a weaker yen is here to stay for the foreseeable future, rendered more likely so by governmental and banking community opposition to overmuch intervention.

Collaboration and innovation

An increasing propensity among shipbuilders to technological and commercial collaboration, allied with the acceleration in industrial consolidation, appears to be creating a more resilient platform for the future. Moreover, shipbuilding strategy is largely focused on fostering added design value and enhanced, through-life asset worth by innovating within existing fields of ship production in which the Japanese industry is strong, i.e. bulkers, containerships and LPG carriers, and in which its reputation is first-class for build quality and contractual performance.

Significantly, the new, more challenging business environment and intensified competition from China and South Korea has not prompted a widespread move into other spheres characterised by high capital intensity, such as offshore vessels and cruise ships.

Application to autonomous ship technology, embracing R&D and physical trials involving research institutes, equipment makers, shipowners and shipbuilders, is also of an order and extent that positions Japan in the global front line as regards prospective commercial readiness.

A plethora of new technical initiatives, applied to standard sizes of bulker and tanker powered by, or prepared for, lesspollutant or future fuels – the most recent proposals including a ClassNK-endorsed, ammonia-fuelled Newcastlemax carrier – demonstrate a widespread bid to update portfolios in tune with the challenges presented by shipping’s energy transition. Cost efficiencies associated with serial or standardised production can help alleviate the premium attached to other than conventional powering arrangements.

The currently limited worldwide orderbook for bulker and tanker tonnage, in proportion to the existing fleet size, together with proliferating environmental criteria and the cruclal need for energy efficiency competitiveness, would suggest demand growth sooner rather than later.

One of the latest endorsements of Japan’s shipbuilding policy gravitation, whereby constructional prowess in target sectors is blended with a more advanced but pragmatic eco concept, is afforded by a project for a 40,000dwt handysize bulker, newly ordered by Taylor Maritime Investment (TMI).

The London-listed firm has opted for an ammonia-ready design from a “top tier” Japanese yard, securing a completion date during the opening quarter of 2024 – “a rare early delivery window given Japanese newbuild contracts are now only deliverable in the second half of 2025” stated the company in January this year. “The vessel will serve to lower the fleet’s overall average age and enhance its ESG (environmental, social and governance) credentials,” said TMI.

All the main players in Japan have effectively withdrawn from full-scale LNGC construction, concentrating instead on technological and design work and specialised equipment supply. However, with LNG carrier newbuild prices rising(the representative contract value for a 170,000m3 vessel incorporating two-stroke, dual-fuel propulsion is now $140m), it is understood that some consideration is now being given to a market return. Meanwhile, the growing nomination of dualfuel installations across the range of vessel types has provided an incentive to Japanese yards to invest in producing shipboard LNG fuel tanks, as has been the case at the expansion-minded Imabari Group.

Resilient Ro-Pax demand

Over a period of years during which Chinese shipbuilding has come to dominate the international market for large ro-pax ferries, and until recently almost totally eclipsing European production, certain Japanese yards have maintained a high profile in the sector, albeit through domestic operators’ policies of continual fleet modernisation.

Denoting a seminal stage of investment in the coastal transportation infrastructure, Japan’s first LNG-fuelled ro-pax ferry has been phased into Inland Sea service. The 200m Sunflower Kurenai offers a 50% increase in freight capacity relative to the retired ship on the long-haul route linking Osaka with Beppu, on Kyushu.

Two such newbuilds were contracted from Mitsubishi Shipbuilding by Mitsui OSK Lines (MOL) in November 2019, and Sunflower Kurenai leads Sunflower Murasaki out of the Shimonoseki yard at Honshu’s western tip on the Kanmon Strait.

The design combines provision for 716 passengers with a ro-ro intake equating to 137 trucks of 13m, or a corresponding commercial mix. Although the passenger certification is roughly equivalent to that of the previous generation, the onboard facilities have been enhanced in keeping with the company’s bid to promote its “casual cruise concept”, building business in the leisure segment as a complement to the line’s transport function.

Entailing 12-hour transits of the Inland Sea, the operation connecting Osaka, Japan’s third most populous city, with the western island of Kyushu, is maintained under the Ferry Sunflower brand. Schedules and year-round service dependability call for vessels to be capable of sustaining just over 22 knots. The propulsion system for each of the newbuild vessels is based on two 16-cylinder models of Wärtsilä’s 31-series medium-speed engine in its LNG/heavy oil dual-fuel version.

Sunflower Kurenai was phased into duty on January 13 this year, superseding the 1997-built, 153m Sunflower ivory. The second newbuild, Sunflower Murasaki, was launched at Shimonoseki during August and is expected to be commissioned in May, taking over from the 26 year-old Sunflower Cobalt

The first-of-class put down a new marker for the industry towards the end of December when she inaugurated the skidbased truck-to-ship bunkering method. The skid solution ensures that four LNG tank trucks feed the vessel simultaneously, speeding the bunkering process and allowing the requisite fuel for the round-voyage to be taken aboard within the limit port turnaround cycle.

A similar arrangement will be adopted for the second pair of LNG dual-fuel ferries ordered by the MOL Group last year from Naikai Zosen. These third and fourth newbuilds are due to be placed with MOL Ferry Co on the Oarai/Tomakomai route during 2025, providing a coastwise link between the Kanto region and the northern island of Hokkaido.

Machinery that will run primarily on LNG should cut CO2 emissions by about 25% as well as virtually eliminating SOx. The preparedness to bear the investment premium entailed reflects MOL Group strategy to achieve net-zero greenhouse gas (GHG) emissions by 2050. Beyond the corporation’s immediate fleet renewal plans, MOL is promoting the wider adoption of LNG fuel through the development of the necessary fuel supply infrastructure in Japan and overseas.

There has long been a substantial variance between European and Japanese ferries in onboard standards, specifically as regards the range and quality of passenger facilities, not least because the ships are seen as fulfilling a vital transport role rather than as platforms for leisure travel. However, the latest generation of Japanese ro-pax vessels demonstrate that an uplift is under way in this respect, in answer both to rising passenger expectations and to a realisation of the enormous scope for mini-cruise business amid the beauty and interest associated with the Seto Inland Sea and other coastal regions of the Japanese archipelago.

Notwthstanding the outfitting intensity of large ferries, and the reliance on a broader range of skilled trades and contractors to fulfil such newbuild projects, the steady output of ro-pax vessels does not necessarily infer a wider ambition or easy transition to entering or re-engaging in the market for cruiseships. Heavy losses sustained six to seven years ago on export cruise ship orders by Mitsubishi Heavy Industries, as it was then, through cost overruns and delays, have coloured thinking and subsequent business strategies in that organisation and beyond.

Cruiseship caution

Whether or not preliminary plans by Mitsui OSK Lines(MOL) to invest in the construction of two 35,000gt cruise vessels will signal a prestigious project for the domestic shipbuilding industry – or will be placed abroad, mirroring NYK Line’s latest cruiseship investment – remains to be seen.

MOL is strengthening the group’s business sectors outside its mainstream shipping activities in line with the 2022 portfolio development strategy. Ocean cruising has less linkage or exposure to shipping market fluctuations, and Japanese demand is expected to grow significantly in the coming years. The envisaged newbuilds would accordingly be designed to suit national tastes and would be deployed by MOL Passenger Lines (MOPAS). The latter currently operates a single, smaller cruise vessel dating from 1990.

NYK Line’s decision in 2021 to order a 744 passengercapacity newbuild from Meyer Werft in Germany was an extremely significant event, both as a rare European success on the Japanese market, and as the only order for a cruise vessel signed by the worldwide shipbuilding industry in that pandemic-beset year. The 52,000gt ship is destined to raise the bar in the Japanese premium luxury segment, and the technological level will be referenced by a dual-fuel power and propulsion installation, podded propulsors, dynamic positioning, cold-ironing, hydrodynamic tailoring to planned routes, and a raft of measures to protect those aboard against infectious diseases.

German industrial willingness, and technical and logistical capacity, to take on a bespoke, moderately-sized newbuild, with no or limited scope for sisterships that would yield cost benefits in repeat or serial production, increases the challenges for Japanese shipbuilders looking to enter or reenter the market.