NORWEGIAN engineering group Aker Solutions is setting up a new production plant for umbilicals in Malaysia to meet market growth in Asia and elsewhere,
The $60 million facility, near the city of Pekan, will take over production for Asian clients that has so far been handled at the company’s existing umbilicals plants in Moss, Norway and Mobile, Alabama.
“We see enormous potential in our market and Asia is the biggest growth market,” said Tove Roskaft, head of the umbilicals division at Aker Solutions.
The company has a global market share of about 40%, with Technip, Oceaneering and Nexans as its main competitors. The new factory will increase Aker Solutions’ umbilicals capacity by about 50%. In addition to meeting expected Asian demand, the move will free up capacity to meet growth in other areas, including West Africa and the North Sea.
The umbilicals segment saw profitability dip last year, after the financial crisis caused orders to drop and put pressure on prices. With tenders and volumes now on the rise, Roskaft expects prices and profitability to follow.
“The volumes awarded in 2009 were only about one-third of the volumes expected this year,” said Roskaft. Looking ahead, projects in Australia, Malaysia and the South China Sea will contribute to higher tender activity in the region.
Producing umbilicals for Asian clients closer to their markets also brings a price advantage, as it is the clients who foot the transport bill.
Labour costs are lower in Malaysia than in Norway, but this has a smaller effect because the main cost lies in steel and other materials, according to Roskaft.
The Pekan facility is set to be operational in the fourth quarter of 2013.