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Fears over standards at China yards
Wednesday 17 September 2008

<p>AN ASTONISHING story of how a Chinese shipyard failed to get the measure of a valuable order was recounted to the Vancouver meeting of the International Union of Marine Insurance.</p>
<p>Red-faced yard employees confused metric and imperial units, effectively converting at a rate of eight inches to one foot. This &#8216;small&#8217; mistake was magnified in volumetric terms to such an extent that its newbuilding turned out to be 13% overweight in terms of steel.</p>
<p>The bungle was one of a catalogue of disastrous practices and false economies unearthed by surveyors at so-called beach yards: facilities set up in recent years on open stretches of land.</p>
<p>It was at the lower end of a huge range of good and bad examples from the Chinese industry detailed in a presentation to IUMI by Simon Grove, founder of consultant Inserve, and Terence Song, and head of the company&#8217;s Shanghai office.</p>
<p>Chinese yard performance is of huge interest to underwriters because of the 2,500 ships on order from the country: 25% of the world orderbook.</p>
<p>Mr Grove hit out at the &#8220;hurry, hurry, hurry&#8221; mentality prevailing at some yards. Some opened for business before their dock was even built, using the first down-payment from a client to finish construction of the yard.</p>
<p>He said that there are 1,000 independent yards along the coast. Construction standards are quite poor: one vessel, for instance, had its double bottom plates covered in cement in an attempt to ensure the integrity of the plating. Some ships sank at launch, and others on their maiden voyage.</p>
<p>The Chinese authorities have shut many yards, ordered others to improve, and produced benchmarking standards. There are plans for a kind of licensing system for shipbuilding, &#8220;but as far as we know, that has not come into force yet&#8221;, Mr Grove said. He listed concerns including:</p>
<p>&#8226; sub-standard materials, such as steel from questionable sources;</p>
<p>&#8226; recycled materials, such as shell plating from vessels that had been scrapped nearby;</p>
<p>&#8226; secondhand machinery and equipment, including unsuitable piping and valves;</p>
<p>&#8226; minimum outfitting, such as only one fuel purefier and one steering motor;</p>
<p>&#8226; speeding up the welding process, producing excessive heat;</p>
<p>&#8226; inadequate supervision, so that drawings were not followed and unauthorised changes made;                                        &#8226; unsafe working practices, in dirty and dangerous workplaces, with workers suffering from fatigue and long hours.</p>
<p>Mr Grove said it was not all bad news, citing a new shipbuilding base being built at the entrance to the Pearl River, with the state-owned yards under China Shipbuilding Corp progressing very strongly. The state is investing nearly $4bn in an engine and machinery plant near the Pearl River complex.</p>
<p>He said that while insurers lacked access to much information, they should investigate thoroughly before participating in a risk.</p>
<p>Often, China Classification Society is appointed for ease of communication and economy, but Richard Leslie, general secretary of the International Association of Classification Societies, said that five IACS members offer services in China. </p>
<p>IACS, together with shipowners and IUMI, is seeking to establish minimum standards. </p>
<p>However, they are some years away from achieving a standard quality measure across all the yards.</p>
<p>Lenny Pondexter of the ABS said that Chinese yards ran the gamut from greenfield mega-yards largely comparable to the best in the world, to start-ups with little or very limited experience and large aspirations. </p>
<p>Skilled management and manpower is in short supply across all sectors: in the yards, the foundries and major equipment suppliers.</p>
<p>In response, ABS is aggressively recruiting surveyors and engineers in China and transferring experienced people of all nationalities to provide training and leadership.</p>

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