November 20, 2008

Japanese steel shortage biting shipyards

A local survey revealed that delays in deliveries of raw materials to Japan’s leading shipyards are growing worse.

Kaiji Press said that delays in the supply of steel plate had reached four weeks in some cases, as shipbuilders continue to resist increases of JPY 30,000 (USD 289) per tonne an increase of nearly 40%. The poll that on average steel supplies are being delayed by two weeks.

A senior executive at IHI Marine told Lloyd’s List that a general body of opinion amongst the yards is that the delays are a tactic being employed by the steel mills to put pressure on shipbuilders to cave in to price increases.

The Imabari shipbuilding group said that it had undergone a thorough review of the group’s order books and construction timeline in order to reduce the adverse effects of late delivery of raw materials. The net effect was to reduce a four-week waiting period to a two week delay in construction. But there was no more flexibility to be pulled out of the system.

Mr Yukito Higaki president of Imabari said that “We cannot make any more reviews or modifications, but we are yet to arrange a reassuring supply system for our required steel volume.”

According to other shipyards polled, steel mills are putting in place a new inspection system that is slowing supplies as deficiencies are noted in various products. The implication is that for products to meet Japanese and other international standards, prices must go up.

An unnamed shipyard spokesperson told the poll that “We heard that if the standards were to be formally adhered to, this would inevitably lead to an increase in price. We are mad, but we cannot help but be speechless with amazement at the turn of events.