Dredging Business Potential (Especially for PT Pengerukan Indonesia)

11 04 2013

After doing some research with my friend, Kristina Voss, for the assignment in the class, I began to realize that dredging business is very big and potential business while there are only few players in the market. With this kind of market, I wonder why is our local stated own company such as PT Pegerukan Indonesia (PT Rukindo) is struggling to have a profit? There should be something wrong with the company and I hope they can get better after joining the Indonesia Port Corporation to becomes one of its subsidiary companies.

Turnover Global Dredging Market

turnover dredging

Source: International Association of Dredging Companies

How profitable is the dredging business? You can see the graph above, it is clearly that this business play a  more and more important role in the maritime business with its stunning turnover of € 10,820 Million in 2010.

Growth Opportunity

There is a high growth potential for dredging around the globe due to the development of ports, oil & gas exploration and the need for land reclamation & coastal protection.

turnover dredging 2

Source: Royal Boskalis Westminster N.V. (2012)

Type of Dredging Ships

There are many obstacles to handle in order to create an optimum ship such as water and wave resistance, specific gravity of water, gravity, air pressure for engine performance, wind resistance, and many more. Due to the diversity of dredging activities the dredging vessel vary a lot in design, as well.

turnover dredging 3

Source: Royal Boskalis Westminster N.V. – Financials and Business Case presentation

A Trailing Suction Hopper Dredge (TSHD) ship is the most favorable ship, if the soil is suitable and the area is large, because this type of ship can almost do every dredging work while coping with the challenges which come from specific gravity of soil and salt water. After dredging the seabed, the dredge material consisting of soil or sand with salt water will be detained in the hopper of the ship. The bigger the specific gravity of the soil, the lesser material can be held in the hopper.

dredge

The Specification of one of the largest TSHD ships in the world, Queen of The Netherlands from Boskalis

Source: http://www.dredgers.nl/

TSHD Ships in the World

turnover dredging 4

Source: http://www.dredgers.nl/ (Own Design)

Different from any other commercial ships, there is limitation for Economic of Scale Principle to Dredging ship, especially for TSHD. As it can be seen in the graph, the growth of the dredging ship with hopper capacity below 5000 m3 is stable. The reason behind this is mainly because the geographical limitation. Every port need to be dredged but not all of them have sufficient draught or channel and turning basin dimension for large dredging ship.

turnover dredging 5

Source: http://www.dredgers.nl/ (Own Design)

As it can be seen in the graph, the length overall (LoA) of the TSHD ships have a tendency not to exceed 250 m due to port limitations (basin, channel, draught, etc) and optimum dimension of the ship. This trend is likely continue in the future. For the same reason, most of the TSHD ships have a hopper capacity under 1000 m3 as depicted in the graph.

How about the ships that owned by PT Pengerukan Indonesia? The largest ships they owned is Bali II and Aru II with hopper capacity 5000 m3. However, as far as I know, for some reasons, the most frequent ships they that they used is the ones that have capacity 4000 m3 and below. I believe that modernization of production tools and corporate restructurization will bring back the company to its glorious days.

dred

Source: http://www.rukindo.co.id/

Key Market Segments

turnover dredging 6

Source: Royal Boskalis Westminster N.V. (2012)

Currently PT Pengerukan Indonesia is very inferior compared to the Royal Boskalis or Van Oord. However, right now they can try to compete in the ports market segment, and when they are big enough, they can try to enter other market such as oil & gas and land reclamation & coastal protection.


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