The Latest Lifeline for Shipyards
(Article originally published in May/June 2015 edition.)
“Eco” designs are all the rage as shipyards compete for orders.
Hardly a ship is delivered these days without being designated an “eco” design. It’s been applied to Meyer Werft’s latest cruise ship, Anthem of the Seas, to Ferus Smit’s latest general/project cargo ship, Nordana Sky, and to Samsung Heavy Industries’ latest tankers.
Eco ships are the latest lifeline for struggling shipyards. After the 2008 financial crisis, many yards initially looked to the offshore industry for salvation. It’s a strategy that’s been adopted globally and continues to be successful. Zamakona Yards in Spain’s recent delivery of field support vessel Ocean Falcon is one example. Sinopacific of China’s new SPA150 AHTS is another, as is Kleven Verft of Norway’s latest offshore construction vessel, Olympic Bibby.
Mergers and takeovers have characterized the industry since 2008, and this too is a continuing trend. Norway’s Siem Industries took over German shipyard Flensburger Schiffbau-Gesellschaft (FSG) last year. This year Meyer Werft secured its hold of Finland’s Turku yard by acquiring the final 30 percent of the company from the Finnish government.
Some yards continue to suffer alone. In China, it has been predicted that the number of shipyards will drop from 100 to just 30 over the next few years. Orders at Chinese shipyards fell 77 percent in the first quarter of this year. Even the world’s largest yards are not immune to the current market lows. Hyundai Heavy Industries posted a loss in the first quarter of 2015 due in part to cost overruns and a slump in newbuilding orders.
More Capacity Than Demand
“It is challenging. It was challenging, and it will be challenging,” says René Berkvens, CEO of Damen Shipyards Group. “The shipbuilding industry is a very mature business. Except for a few years prior to the economic crisis of 2008, it has been a business where there has always been more capacity than demand, which means it is always fairly competitive and very price-driven.”
Damen started the year with a healthy orderbook but has its trouble spots too. The company operates two yards in China. “One of the shipyards is very much involved in tugboat building,” notes Berkvens, “and that has been a pretty stable business and will remain like that for the foreseeable future. The other shipyard used to build small cargo ships up to 15,000 tons deadweight. That market obviously has been quite depressed over the last year, so like many other shipyards around the world, including those in China, we had to throttle down on that activity. We have replaced it with other activities including our pontoon and barge business, which we have grown quite substantially.”
Berkvens thinks innovation is the best recipe for future success, and Damen has teamed up with Oslo-based NGO Bellona Foundation to develop concept vessels for the future. One of the goals is to make the ships independent of fossil fuels. “Our teaming up with Bellona is one of the many different steps in many different directions we are taking in order to develop more eco-friendly concepts,” he adds.
As part of its eco initiatives, Damen has already built its first diesel-electric and battery powered tug. The vessel was launched last year, and a second is underway. The company will also launch its first inland waterways self-propelled barge that will be fuelled by LNG and have an air lubrication system.
Damen recently completed the world’s first floating tidal energy-generating Bluetec platform. Targeted at the global market, it can be shipped in containers and installed anywhere in the world to provide clean electricity. The platform is a variation of Damen’s modular barge system.
Berkvens expects a busy year for all aspects of the business: “The challenge will be to see which markets are active in such a way that we can get the same order intake as last year, which was very good.” He is optimistic about offshore renewables but less so about offshore oil and gas activity although the company continues to make significant deliveries in the sector.
Damen has just started building two PSVs for Canadian maritime services provider Atlantic Towing. Its business in Canada is expanding with the recently concluded negotiations for a certified service and maintenance center on the east coast. In Africa, Damen has received orders for two PSVs and two FSVs from Africa-focused investment firm L.A.T Cleveson. The deal will bring next-generation Damen PSVs to the offshore industry in Nigeria and the Gulf of Guinea for the first time.
Offshore Benefiting U.S. Yards
OSVs are bolstering the U.S. shipbuilding market too. Eastern Shipbuilding Group delivered the HOS Warland to Hornbeck Offshore Services in March. HOS Warland is the first of a series of multipurpose service vessels (MPSVs) launched for Hornbeck. A second vessel, the HOS Woodland, will deliver this summer.
VARD Marine and Eastern provided the design based on Eastern’s successful Tiger Shark series, of which twenty have been delivered worldwide. The two DP 2 MPSVs will be U.S.-flagged and Jones Act-qualified with 9,000kW of installed AC diesel-electric power and twin azimuthing Z-drives. These high-tech vessels feature four Cat 3516C 16-cylinder turbo-charged EPA Tier 3/IMO II diesel generators.
The HOS Warland was the first ship to christen Eastern’s newly constructed 425-foot rocker beam system installed at its Allanton, Florida facility. Eastern has also recently completed construction of a 300x100-foot warehouse as part of its ongoing Allanton improvements.
U.S.-based Vigor Industrial has its eyes on the Arctic OSV market after announcing its takeover of Kvichak Marine in March. The transaction builds on the 2014 merger between Vigor and Oregon Iron Works (OIW), which expanded Vigor’s reach into highly complex industrial products in marine, renewable energy, aerospace and other commercial construction industries. The synergy between Vigor, OIW and Kvichak provides the ability to fabricate larger and more complex components and expand the group’s offerings for building offshore support vessels, oil spill response vessels and systems, modules, rigs, terminals and related structures.
Keith Whittemore, Vice President for Business Development, says the group’s offshore capabilities extend from small oil skimmers built from aluminum to high-end fabrication and machining to large steel vessels. “The size and scale of Vigor’s shipyards, in particular the Portland yard, rival any of the largest shipyards in the U.S. One of our focuses is most definitely offshore oil and gas with a main priority for the Alaska oilfields.”
The mergers were not the result of having to consolidate in tough times, says Whittemore: “It is about adding capabilities for our customers. Kvichak never competed with Vigor and never competed with OIW.”
Vigor is gearing up for another Alaskan market. “It’s been a long time since there has been any significant number of commercial fishing boats built for Alaska,” says Whittemore. “Many of the vessels are 40-plus years old. Kvichak has a long history in the commercial fishing industry, and we hadn’t built fish boats for effectively 20 years. Now we’ve built four this winter. Vigor has also built one.”
The Promise of LNG
Shipyards in the U.S. are also booming as a result of new orders arising from the nation’s shale revolution, and politicians love the job-creation potential of the idea. U.S. Congressman John Garamendi has urged the industry to focus on the construction of LNG carriers: “When we export LNG, we need to make sure that the export of this natural asset is being conducted by American sailors on American ships. In doing so, we will revitalize America’s shipbuilding industry in a big way.”
U.S. yards aren’t waiting for political rhetoric. They are already thinking in terms of LNG technology – particularly for LNG-powered vessels. General Dynamics’ NASSCO has launched the world’s first LNG-powered container ship, and Gulf Coast Shipyards has already built the Harvey Energy, the first LNG-powered vessel to be operational in the U.S. It meets the stringent requirements of ABS’s ENVIRO+, Green Passport notation. As an OSV, the vessel captures three market trends: a desire to support the offshore oil and gas industry, the quest for eco-friendliness, and the adoption of LNG.
But the U.S. has by no means cornered the LNG-fuelled market for cargo ships of the future, a market which promises to be a phenomenon akin to eco ships and offshore vessels for struggling shipyards. South Korea’s Hyundai Heavy Industries has developed a new gas treatment system to reliquefy boil-off gas that will be installed on two LNG carriers for Knutsen of Norway.
China’s Tsuji Heavy Industries has delivered a 5,000-dwt short sea cargo vessel to Nor Lines in Norway. With technology partner Rolls-Royce providing the vessel’s pure-gas engine, its Promas integrated rudder and propeller system and a hybrid shaft generator to optimize the use of electrical power, this eco ship promises solutions that will be adapted to a range of different ship types in the future. – MarEx
Wendy Laursen is the magazine’s News Editor for Asia Pacific.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.