Global Shipbuilding and Repair: Riding the Rebound

Despite a global recession, financial meltdown and cancelled contracts, the shipbuilding industry has survived and recovered from the wreckage of the last three years and is slowly gaining steam.

Most of the big yards in China, Japan and Korea are going full blast, turning out more bulkers and tankers for a market that is already glutted. The European yards are holding their own as well, helped by an upsurge in cruise ship contracts and expanding offshore opportunities like wind farms. In this, our annual Global Shipbuilding and Repair issue, we circle the globe to survey the market and see what’s new in our industry.
From Vladivostok to Gibraltar
“The Russian Far East is booming,” states Piotr Bilon of the Far East Center of Shipbuilding and Ship Repair (DCSS) in Vladivostok. DCSS is part of the state-owned United Shipbuilding Corporation, is eager to attract new business and has invited experts from Poland and other countries to provide qualified European ship design and building expertise to support the anticipated growth. “Since the activity is connected with the Russian state shipbuilding program, there is an expectation that the growth of this region will continue for some time,” said Bilon. Igor Borbot, General Director of DCSS, believes that the improvements in ship design and construction will attract shipowners to investigate this region for their future needs.
Halfway around the world, in Brazil, massive new oil discoveries have led to a shipbuilding boom with the state oil company, Petrobras, expected to commission more than 200 offshore support vessels and 28 drill ships in the period ahead using Brazilian content. One company to take advantage is Houston-based Electronic Power Design (EPD), which opened an office in Niteroi across from Rio de Janeiro with seven Brazilian technical support engineers. EPD is not a shipyard but works closely with boat builders and others to provide advanced power systems for vessels. With the recent order of four Guido Perla’s GPA-688SC and PSV-4500 vessels equipped with EPD power systems, John Norwood, Vice President of Business Development, is optimistic: “We see a great future in Brazil, which is one of three regions where we are expanding. The other two are China and Singapore.”
IHC Merwede B.V., The Netherlands, is the global market leader for efficient dredging and mining vessels and equipment. According to its President, Govert Hamers, “IHC Merwede has as its key customer focus innovative vessels, advanced equipment and life-cycle support. IHC Merwede can provide every element of cost structure and technology for optimizing our products.” On the equipment side, IHC Merwede provides innovative automatic excavators that now can automate operations to the level of a one-man dredging operation. And innovation continues. IHC Merwede was there at the birth of modern dredging and today is on the cutting edge of deep sea mining technology. According to Hamers, “We are focused on deep sea dredge mining around the world and are pioneers in extracting minerals from the ocean floor at depths of 2 - 3,000 meters.” Last year IHC Merwede acquired MMP Cape Town, South Africa – now known as IHC MMP – where dredging in undersea volcanic deposits provides potential to recover large gold deposits and rare earth metals resting on the sea floor. As a reliable supplier of custom-built ships and equipment for offshore construction, IHC Merwede is renowned for focusing on the development of innovative solutions, as highlighted by its position as the technology innovator.
Gibdock Gibraltar (guess where it’s located?) offers a year-round dry climate and the perfect location for ship repair and maintenance. Last month it completed the drydocking of the Thomson Celebration for Columbia Shipmanagement. “This was a significant project commercially for Gibdock, as it was the first time we had docked a cruise ship for Columbia Shipmanagement,” noted CEO Joe Corvelli. “Winning this contract and overcoming some tough challenges on the way to complete it on schedule reflect very well on the yard and all our staff,” he added. Gibdock is becoming something of an offshore specialist and currently has four offshore vessels in the yard. Based on its strategic location close to the West African offshore oilfields, efforts are underway to attract more of this business.
Canada’s National Shipbuilding Procurement Strategy
Canada has the longest coastline of any country in the world, and last year it announced a program to safeguard it well into the 21st Century by rebuilding its navy and coast guard. The multifaceted National Shipbuilding Procurement Strategy will ensure that Canada’s shipyards are gainfully employed for years to come. The multifaceted program will build and maintain a fleet of ships for national security and coastal patrol services across the Arctic, Atlantic and Pacific Oceans. It will provide the largest peace-time federal shipbuilding program in Canadian history with a government investment of $35 billion over the next 30 years.
Halifax-based Irving Shipbuilding is poised to take advantage. It has four yards - Halifax Shipyard, Woodside Industries, Shelburne Ship Repair, and East Isle Shipyard – as well as Fleetway Facility Services, which operates two fabrication shops in St. John, New Brunswick. In 2010, Irving delivered a $60 million, state-of-the-art offshore supply vessel for Nova Scotia’s offshore sector and a semi-submersible rig refit for a Mexican client. A three-year, $194 million contract to build nine high-tech mid-shore patrol vessels for the Canadian Coast Guard is well underway in addition to a mid-life refit on HMCS Halifax, part of an eight-year, $549 million contract to repair and service the Canadian Navy’s frigates. “Even though we have a strong order book,” said President Steve Durrell, “we are continuing to pursue opportunities in ship repair, new construction, offshore oil and gas and other markets where we see movement and opportunity.” A wise and diversified strategy that should pay dividends in good times and bad.
Perhaps the most significant long-term opportunity for Irving is its bid to build and maintain Canada’s fleet for the next 30 years under the National Shipbuilding Procurement Strategy. “Irving Shipbuilding is one of four competing shipyards and, while we plan to bid for both the combat and non-combat contracts, we feel that we are best suited to build the combat vessels for the Canadian fleet,” said Durrell.
British Columbia-based Seaspan Victoria Shipyards is another key player in the Canadian market. It performs new construction, conversion, repair and maintenance projects for vessels up to 100,000 DWT. Malcolm Barker, Vice President & General Manager, said that the National Shipbuilding Procurement Strategy to revitalize the aging Canadian fleet is a priority focus for his team as well. “There is also major discussion taking place about drilling in the Arctic for oil and tapping the oil sand reserves in Canada, both of which would increase ship traffic and opportunities for us,” he added. Barker foresees that increased global warming will require more patrol vessels for the sensitive Arctic area as traffic in the region increases. He plans to be ready and has implemented new technologies and programs such as lean shipbuilding and Six Sigma into his operations.
Down on the Bayou
Farther south, along the U.S. Gulf Coast, many yards are suffering in the aftermath of the Deepwater Horizon oil spill and the subsequent “permitorium” on deepwater drilling. But there are notable exceptions, focused largely on military contracts. Lockport, Louisiana-based Bollinger Shipyards, the oldest and grandest of the Gulf yards, is building the U.S. Coast Guard’s Sentinel Fast Response Cutter. Mobile-based Signal International recently completed the fabrication of 187 modules for the U.S. Navy’s LPD (“Landing Platform Dock”) ship program, a project that extended over three years and was worth $237 million.
The Gulf Coast is the “Silicon Valley of shipbuilding,” stated Austal USA’s CEO Joe Rella. The quality of the workforce is high and it has long experience in building everything from offshore support vessels to massive drilling rigs. Mobile-based Austal USA (a subsidiary of the Australian shipbuilder) will provide workforce stability for some years to come with the recent announcement of a fixed-price incentive contract for the construction of a fourth 127-meter trimaran Independence Class Littoral Combat Ship for the U.S. Navy valued at $369 million. The long-term contract calls for construction of up to an additional 10 LCSs to be appropriated in the next five years with a total value in excess of $3.5 billion. Rella noted that “Austal is in the midst of a facility expansion and personnel growth phase to support the awarded programs, which represents a backlog of construction up to 2018.” He expects Austal to increase its U.S. workforce to approximately 4,000 employees. The company is constructing additional areas of factory space as well as a fourth assembly bay on the Mobile waterfront, a new administration building, and a building dedicated for Navy use. It has also purchased additional waterfront property for in-water ship construction. Modular-based manufacturing with transversely fed assembly stations makes Austal a leader in innovative shipbuilding solutions. The company has a dedicated onsite training and skill validation center, which it operates in partnership with the State of Alabama’s industrial training office.
VT Halter Marine in nearby Pascagoula, Mississippi is building everything from Egyptian Navy Fast Missile Crafts (ENFMC) to Crowley barges and ATBs, OSG  tugs, and PASHA combination container/car carriers. With such a diverse portfolio, we asked CEO Bill Skinner about some of his daily challenges. “One significant challenge we face is the state of the economy and the tentative and highly competitive nature of the commercial market,” he stated. “Vessel operators are in a ‘wait and see’ mode.” Skinner added that the continuing permitorium on drilling in the Gulf has many operators hesitant to invest in new vessels because of the uncertainty of timely approval of drilling permits. While he remains optimistic that the U.S. Gulf market will rejuvenate in the near future, he is not sitting on his hands and continues to seek new military contracts to provide a healthy backlog of defense and foreign military sales orders for the yard.
LEEVAC Industries of Jennings, LA will build two Lightering Support Vessels in addition to the two vessels currently under contract with AET Lightering Services with possible options for more. LEEVAC is a world-class shipbuilder founded in 1965. Last year it announced the opening of LEEVAC Shipbuilding and Repair Calcasieu, located in the Lake Charles LNG turning basin, to serve as a ship repair facility. With protected deep water, a 1,600-foot bulkhead, and a location 17 miles from the Gulf of Mexico, the facility will offer both topside repairs and drydocking services for vessels of all types. The new yard allows LEEVAC to service existing customers and provide an attractive option for new customers.
Horizon Shipbuilding of Bayou La Batre, AL has expanded its repair business over the years as a way of improving the efficiency of the yard, noted President Travis Short. “Even though we have several ongoing newbuild projects, the quick turnaround of repairs allows us to pull from the trades that have not yet fully ramped up on new construction projects,” he added.  Horizon is currently working with Florida Marine Transporters to build its 140-foot and 120-foot towboats as well as 114-foot and 58-foot towboats for the U.S. Army Corps of Engineers. “Our strategic alliance with Florida Marine Transporters will continue to be the basis of our new construction business,” Short commented. “There are also international opportunities in West Africa, Mexico and Brazil that we intend to aggressively pursue.” In recent years Horizon has made substantial investments in equipment, most notably a 660-ton TraveLift and an 80-foot CNC plasma cutting table, as well as other investments that have positioned the company for continued growth and marketplace competitiveness.
Blue Skies Ahead?
It’s a mixed bag, all right, but most yards are more than holding their own and looking forward to better times to come. Diversification and the ability to attract government and military business during periods of slow economic growth are key to staying afloat. The worst is over, and the future for the global shipbuilding industry looks increasingly bright.
Source: Maritime Executive