Market Analysis – 81103001 – Under water inspection in lieu of dry-docking service

Market Analysis Brief: Underwater Inspection in Lieu of Dry-docking (IWS)

UNSPSC: 81103001

1. Executive Summary

The global market for In-Water Surveys (IWS) is a critical, technology-driven segment enabling significant operational cost savings for marine asset owners. The market is estimated at $2.1 billion in 2024 and is projected to grow at a 7.2% CAGR over the next three years, driven by regulatory acceptance and high dry-docking costs. The primary opportunity lies in leveraging advanced robotics and AI-powered analytics to reduce inspection times and improve defect detection accuracy. Conversely, the most significant threat is price volatility, with key cost inputs like vessel charters and specialized labor experiencing double-digit inflation.

2. Market Size & Growth

The Total Addressable Market (TAM) for IWS services is directly linked to the global shipping fleet and offshore energy infrastructure. Growth is outpacing the broader ship repair market as classification societies increasingly approve IWS to extend dry-docking intervals from 5 to 7.5 years. The market is projected to grow steadily, driven by efficiency demands and the expansion of offshore wind installations.

Largest Geographic Markets: 1. Asia-Pacific: Dominant due to major shipping lanes and the world's largest shipbuilding/repair hubs (Singapore, China, South Korea). 2. Europe: Strong demand from North Sea oil & gas, a mature shipping market (Rotterdam, Hamburg), and a rapidly growing offshore wind sector. 3. Americas: Centered on oil & gas activity in the Gulf of Mexico and major shipping traffic on the East and West Coasts.

3. Key Drivers & Constraints

1. Demand Driver (Cost Avoidance): IWS offers a 70-90% cost reduction compared to a full dry-docking event by eliminating the need for vessel transit, yard fees, and extended off-hire time. This is the primary value proposition for ship owners.
2. Regulatory Driver (Class Society Approval): Major classification societies (e.g., DNV, ABS, Lloyd's Register) have established standards for IWS, making it a viable, certified alternative for intermediate surveys, which is expanding the addressable market.
3. Technology Driver (Robotics & AI): The shift from diver-led inspections to Remotely Operated Vehicles (ROVs) and Autonomous Underwater Vehicles (AUVs) enhances safety, data quality, and operational range. AI-powered analysis is reducing report turnaround times.
4. Cost Constraint (Input Volatility): The service is exposed to volatile costs for specialized assets and personnel. Day rates for appropriate support vessels and certified ROV pilots/divers can fluctuate significantly based on regional demand, particularly from the offshore energy sector.
5. Technical Constraint (Scope Limitations): While expanding, the scope of IWS is still limited. Major repairs, propeller polishing, and certain detailed structural assessments still mandate a dry dock, capping the total replacement of traditional methods.
6. Barrier to Entry (High Capital & Certification): Significant capital is required for advanced ROVs (upwards of $1M+ each) and support vessels. Furthermore, gaining approval from multiple classification societies is a rigorous, time-consuming process that favors established players.

4. Competitive Landscape

The market is concentrated among a few global, integrated service providers, with a fringe of specialized and regional firms.

⮕ Tier 1 Leaders * Oceaneering International: Differentiated by its market-leading fleet of work-class ROVs and integrated asset integrity solutions. * Fugro: Strong in geophysical and geotechnical data acquisition, positioning IWS as part of a holistic subsea data service. * Subsea 7: Primarily an EPCI (Engineering, Procurement, Construction, and Installation) contractor, offering IWS as part of its life-of-field and IRM (Inspection, Repair, Maintenance) services.

⮕ Emerging/Niche Players * Phoenix International: Specializes in complex underwater operations, including deep-water survey and recovery, often for government/military clients. * Hibbard Inshore: Focuses on inspection of confined and challenging inland marine environments (dams, tunnels, pipelines) using smaller, specialized robotic systems. * Waygate Technologies (Baker Hughes): Leverages expertise in non-destructive testing (NDT) technology, offering advanced sensor and imaging solutions for underwater inspection. * Forssea Robotics: An innovator in smart ROVs and autonomous docking systems, aiming to reduce the reliance on large offshore support vessels.

5. Pricing Mechanics

Pricing is typically structured on a project or day-rate basis. A standard project quote includes mobilization/demobilization fees, day rates for personnel and equipment, and a lump sum for data processing and reporting. Mobilization can account for 15-30% of the total project cost, depending on the asset's location relative to the supplier's base.

The price build-up is highly sensitive to market factors. Day rates for a vessel and full IWS crew can range from $25,000 - $70,000+, depending on vessel specification, water depth, and region. The most volatile cost elements are external market-driven inputs, not the supplier's direct margin.

Most Volatile Cost Elements (Last 12 Months): 1. Vessel Charter Rates: est. +15-20% increase, driven by tight supply in the offshore service vessel (OSV) market. 2. Specialized Labor: est. +8-12% wage inflation for certified ROV pilots and inspection divers due to high demand from offshore wind and oil & gas. 3. Marine Gas Oil (MGO) / Fuel: est. +/- 30% fluctuation, directly impacting mobilization and on-station operational costs.

6. Recent Trends & Innovation

• Remote Operations (Q3 2023): Major suppliers like Oceaneering and Fugro are expanding their Remote Operations Centers (ROCs). This allows ROV pilots and survey specialists to execute projects from onshore, reducing offshore manning, cost, and HSE exposure. [Source - Fugro, Q3 2023 Report]
• AI in Data Analysis (Jan 2024): Classification societies are increasingly accepting AI-assisted analysis of video footage. AI algorithms automatically screen for and classify anomalies like corrosion, cracks, and marine growth, reducing analyst time by a reported 30-50% and improving consistency.
• "Resident" Robotics (Ongoing): The concept of placing autonomous "resident" robots on subsea infrastructure (e.g., offshore wind farms) for on-demand inspection is moving from pilot to early commercialization, promising to eliminate mobilization costs entirely for recurring inspections.

7. Supplier Landscape

8. Regional Focus: North Carolina (USA)

Demand in North Carolina is driven by two primary sources: commercial shipping at the Ports of Wilmington and Morehead City, and the nascent offshore wind industry, particularly the Kitty Hawk Wind project. The state's significant military presence also generates periodic demand for naval asset inspection. Local supplier capacity is limited to smaller commercial diving outfits. Major IWS projects are typically serviced by larger Tier 1 or 2 suppliers mobilizing from the Gulf of Mexico or the US Northeast, incurring significant mobilization costs. The Jones Act requires the use of US-flagged vessels for any domestic point-to-point transport, which can constrain vessel availability and increase costs. State-level support for offshore wind supply chain development may incentivize suppliers to establish a local operational base in the next 3-5 years.

9. Risk Outlook

10. Actionable Sourcing Recommendations

1. Mitigate price volatility by consolidating spend under a 2-year framework agreement with one primary and one secondary global supplier. Mandate open-book pricing for vessel and fuel costs to ensure transparency. Target a 10% reduction in non-transparent "all-in" day rates by decoupling volatile elements from the supplier's core service margin.
2. Drive efficiency by launching a pilot program for an AI-assisted inspection on a non-critical asset within 12 months. Partner with a supplier offering this technology to benchmark a 25% reduction in report delivery time and quantify improvements in anomaly detection against our current baseline. This builds internal capability and prepares for wider adoption.