Despite decreased sales from offshore and marine equipment suppliers, German companies are still posting profits according to the German Engineering Federation. Following is a snapshot of how the current market is affecting German business and provides telling trends for the industry across the world, particularly regarding the need to exploit niche markets.
"In 2010, we are finding new customers worldwide in niches that would have been inconceivable in the boom period. This is now vital for survival, as the sector is currently being buffeted by stormy seas," reported Dr. Alexander Nürnberg, chairman of the German Engineering Federation (VDMA) – Marine and Offshore Equipment Industries.
Sales down 7.7 percent to EUR11.9 billion (US$15.36 billion) in 2009
German marine and offshore equipment suppliers with their 72,000 employees achieved sales of EUR11.9 billion (US$15.36 billion) in 2009. This was a drop of 7.7 percent compared to the previous year. The export rate was 75 percent. Production capacity utilisation is now significantly lower. Offshore equipment suppliers were not affected by the downturn in sales, their growth in recent years continuing almost unchanged.
Sharp fall in incoming orders jeopardising work in the years ahead
After the dramatic decline in shipbuilding orders from October 2008, incoming orders for equipment suppliers plummeted by 29 percent in 2009. The order situation for suppliers also remains weak in 2010, even if an increasing trend with new projects and retrofit investments among shipowners is already becoming apparent.
Opportunities in new export markets
In view of the continuing low order activity, marine and offshore equipment suppliers have concentrated on developing new export markets. The delegation trips carried out by the German Engineering Federation (VDMA) in 2009 have yielded initial results and are being continued in 2010 and 2011.
Newcomers such as India and Brazil are forging ahead in the global market, trailing the top three shipbuilding countries from Asia, China, South Korea and Japan. Of the 1,599 orders for ocean-going vessels placed worldwide in 2009 (previous year: 2,928), 605 (951) were booked by China, 281 (510) by Japan, 140 (557) by South Korea and 89 (209) by the EU-27, including only seven (34) in Germany. Orders on hand for vessels globally fell significantly for the first time last year from 11,341 to 9,226 units.
China is still the largest foreign market
The foreign business of German suppliers in 2009 was mainly in Asia (36 percent) and other European countries (32 percent). China is the largest foreign market claiming over 20 percent of exports, followed by South Korea (12 percent).
The sector is very keenly observing the efforts Asian countries are making to expand their own equipment suppliers. German equipment makers must therefore aim to retain and improve their lead in terms of technology and logistics.
Outlook for offshore sector
The involvement of German suppliers in the offshore oil and gas industry that has been increasing for several years will continue to grow even in the wake of the catastrophe in Gulf of Mexico.
As Christoph Daum of MENCK (Kaltenkirchen) notes: "Demand for top-quality and reliable equipment is strong. Availability and high environment and safety standards are key competitive advantages of German companies in this respect."
Offshore equipment suppliers are active in the oil and gas area as well as the offshore wind segment. Here there are synergies favouring "learning from one another" and therefore contributing to upholding the status of Germany as a maritime location. The German Engineering Federation (VDMA) thus actively promotes networking between these two maritime industries.
Need for flexibility for companies and employees
It will probably not be possible to retain the current workforce in 2010. The sector will try to make the necessary adjustment via fluctuation due to retirements.
"2011 and 2012 will represent a crucial test for our sector," prophesises Dr. Bernd Sitte, from Bramstedt.
Last year, Germany was confronted by the need to deliver products that had been ordered but on the other hand were aware of the subsequent dearth of orders. Now orders are coming in very late with very short delivery deadlines.
"That requires immense flexibility for the workforce and employment possibilities," remarks Bernd Sitte.
Precisely for small or medium-sized marine and offshore equipment suppliers, the "breathing" company is the prerequisite for survival in the world market.
Source: VDMA (German Engineering Federation)
