Countries seeking inexpensive warships are finding that second-hand ships offer
a viable alternative to pricey new vessels. As more nations continue to downsize
their navies, experts predict that surplus ships will inundate the world market,
likely at the expense of new ship construction.
Chile’s decision last year to cancel a $900 million new ship procurement
program—in favor of buying used ships from the Dutch Navy—alarmed
shipbuilding firms that had been competing fiercely for that award. By opting
for second-hand ships, the Chilean government saved several hundred million
dollars.
What makes the used-ship market attractive is that many surplus vessels are
in relatively good condition, and cost a fraction of the price of new ones.
“There has been a steady flow of very capable warships of all types made
available since 1991,” notes a study by AMI International, a naval market
research firm in Bremerton, Wash. The report is titled, “Naval Ship Transfer
Assessment: A 10-Year Perspective.”
Today, a “new wave of ships are being retired early and being offered
on the world used ship market,” says AMI. The Ukraine, for instance, built
its entire navy in 1996 with used ships from other countries.
More than 100 used ships were transferred in 1996. Through 2001, countries
gave away or sold between 20 and 40 used ships a year.
AMI predicts that at least 10 to 15 percent of new ship requirements during
the next decade will be filled by decommissioned ships.
The implications of this trend could be significant for the U.S. and European
shipbuilding industry, which not only must compete with the used-ship market,
but also is losing ground to Asian competitors.
At the end of 1996 there were approximately 17,500 ships afloat in the 151
navies around the world, according to AMI. It is anticipated that the number
will become smaller as more ships are decommissioned than are built. Modern
warships, additionally, are more complex, and therefore more expensive, than
those they are replacing. “As a result, new construction programs today
seldom replace existing classes on a one-for-one basis,” the study says.
Worldwide, about 70 navies actively are planning naval re-capitalization projects
for the next 20 years. That would amount to a market for approximately 140 new
vessels heavier than 100 tons, worth about $30 billion a year.
Competitions for new-ship programs will see emerging international players
battling the traditional European and U.S. suppliers. AMI sees South Korea,
Singapore, India, China and Turkey as strong contenders in the global market.
“The South Korean shipbuilding industry is a world leader, and the nation
has already commenced selling or donating small ships to other Asian navies,”
the report says. “There is even rumor of its first submarines being transferred
to Indonesia later in this decade.”
Singapore also produces high-quality ships, says AMI. “Because Singapore
has a small navy, it may well be selling its ships well before they would normally
decommission in order that new contracts for new shipbuilding can be signed
to support and maintain their naval ship construction expertise.”
India is undergoing a “revival,” after decades of neglecting the
naval shipbuilding industry, says AMI. “While it will take some time to
establish a reputation for well-built ships, should the Indian Navy continue
to receive a reasonable budget for ship acquisition, simply the size of re-capitalizing
its navy will mean that there will be a time in the next decade when a number
of ships could be put on the market.”
China, simply by the size of its navy and its requirements, will have ships
to offer, says the study. “As these ships become equipped with more original
Western equipment or licensed produced versions they will attract more attention.”
Turkey, meanwhile, has “aspirations of developing a fleet comparable
to any in the Mediterranean.”
Two other potential contenders in the ship market are Japan and Taiwan.
“At some point within the next decade, it is likely that the present
restrictions on Japan defense industry participation in the world market and
their permission to export will be lifted,” the study says. “It
is possible that simultaneously the Japanese Self-Defense Force will be allowed
to sell ships in the new and used ship market. If and when this occurs, the
used ship market will no longer be dominated by the United States and Europe,
it will belong to Asia.”