This month’s Hot News Modernization issue reports on three market developments related to auxiliary ships. This is a timely reminder that these vital components of any naval fleet, often overlooked, come in many shapes, sizes and designs. All are critical to sustaining “leading edge” force structure elements, from destroyers and frigates to submarines, amphibious ships and aircraft carriers.
AMI tracks both current and future auxiliary ships in detail through our Existing Ships and Naval Projections market intelligence tools. When combined, the two make for a uniquely detailed and actionable market research capability. Our consultants as well as our customers use AMI’s market insights in a range of revenue-enhancing applications from tactical captures, to new market entry strategies and for long-range revenue planning.
This month we provide a few takeaways from a quick look at AMI’s auxiliary market data. Today, the global auxiliary fleet is old. Almost half of auxiliaries in service today were commissioned before 1989. As seen below in the decommissioning section, the Turkish Naval Force (TNF) decommissioned a 75-year old submarine rescue ship. Although extreme, most auxiliaries do tend to serve well beyond the designed 30 or 40-year service lives.
This represents a clear opportunity for refit and modernization, as seen in the article regarding the refit of Polish intelligence collection ships that are now 43 years old. A stable hull and modernized mechanical and electrical system can provide extended service with several upgrades of combat and sensor systems throughout its life.
The need for auxiliary modernization will only continue to grow, as these ships will not be replaced on a one-for-one basis. As seen in the table below drawn from our ESDB, auxiliary new construction has continued to drop steadily every decade since the end of the Cold War.
- # of Auxiliaries
- Built
- Age
- %
- 85
- Before 1968 >
- 50
- 6%
- 211
- 1969-1978
- 40 to 49
- 15%
- 338
- 1979-1988
- 30 to 39
- 25%
- 323
- 1989-1998
- 20 to 29
- 24%
- 220
- 1999-2008
- 10 to 19
- 16%
- 189
- 2009-2018
- <10
- 14%
- 1366
- 100%
The picture for future current construction rates is even worse. AMI forecasts that the next 20 years will see about 100 new auxiliaries built per decade. This is around 50% below the declining construction rate seen in the past ten years. Through 2037, auxiliary new builds will be roughly one third the new construction rate seen at the peak of the Cold War and just after, when auxiliary ship orders continued at Cold War rates.
This looming shortage in auxiliary ships will drive some countries to turn to lease or conversion of commercial shipping to fill these missions. This represents a further market opportunity for systems and equipment makers.
Of the new construction auxiliaries, AMI forecasts that 198 will be built through 2037, logistics and replenishment ships make up the largest component of the market sector. AOEs and AORs make up about one third (66 hulls) of all new build auxiliary types, or roughly 40% of the segment’s total value (acquisition cost).
This focus on logistics ships is not surprising when looking at the growing numbers and capabilities of navies such as China and India, where new aircraft carriers and large surface combatants joining their fleets are increasing their range and pace of global deployments. This requires an extensive mobile logistics train.
And the United States and many European navies also deploy globally, hence their need for next generation logistics ships such as the John Lewis class AOR (16 hulls, total program value of more than US$10B), which are additional drivers in the AOE/AOR sector of the market.
While the new construction spending detailed above seems impressive, it still signals potential under investment in auxiliary capability relative to other elements of fleet structures. By hull numbers, the auxiliary segment makes up only 6% of all new construction naval ships that AMI forecasts will be built through 2037. In market value, the picture is even less promising, with the US$50B spent on new construction programs, which is only 5% of the almost US$1T in total new build naval ship construction we project in the next two decades.
Our numbers clearly point to a growing market for naval modernization and refit in the auxiliary ship market, as these types grow older and fewer. At the same time, operational demand for their capabilities continues to grow as navies increase the pace of global operations.
As customers review their position in the auxiliary market, AMI’s market assessment tools can help refine your approach to what has traditionally been an overlooked segment of the naval market.