Shipyards Face The Music As Vessel Orders Decline And Protectionism Looms

WORLDWIDE – Shipyards hit the headlines this week mostly for all the wrong reasons. As the global recession sinks its claws into the businesses which form the underlying framework of commerce, the yards scrabble for any new orders whilst facing the biggest ever spate of cancellations and delays in payment.

The down turn in tonnages moving across the world, with freight ships of all types being moored or laid up wherever convenient, has presented a stark future for the yards where new orders have almost dried up. Such times lead to outbursts of dissent and underhand practices.

In India there have been dozens of police raids down the whole west coast of the subcontinent where officials of the ABG shipyard stand accused of corruption and are alleged to have acquired huge tracts of land for shipbuilding development under dubious circumstances.

The problem in Finland mirrors the situation across Germany and most of Europe with the STX yard in Finland, under South Korean ownership, watching orders dry up and lay offs continuing. As STX’s almost 4000 Finnish employees work more and more quickly on fewer and fewer vessels undergoing construction, they expect to lay off about a quarter of the staff by the end of the year. South Korea have been fiercely criticised by Japan for favouring their native industry with Government subsidies and the downturn is producing accusations of protectionism in all quarters.

Some nations simply shrug off such criticism, seeing such nationally biased economics as patriotic, others actively accuse their countrymen of disloyalty if they look to build elsewhere. In Brazil these admonishments came from the highest Government office when President Luiz Inacio Lula da Silva attacked Vale, the South American mining giant, for looking overseas companies to tender for their very large ore carriers, leaving the company to defend itself and backpedal rapidly. Vale, it seems, believes a better deal may be struck with STX and other foreign builders and has doubts as to the efficacy of its native Brazilian industry.

The long term prognosis may be even bleaker for the shipbuilders. In Germany we have seen dozens of new build orders cancelled with six yards failing and now the Hegemann Group, owners of three German yards, being granted local state aid equating to almost €30 million, and according to local reports, borrowing €65 million in total, to enable their continued ability to complete current orders. The German authorities will monitor the group closely to avoid repeating mistakes of the past when loans have simply delayed the inevitable demise of other yards.

Meanwhile in Poland it seems even history conspires against the industry. The iconic shipyards of Gdynia and Szczecin were to have been sold off under instructions from European Competition Commissioner Neelie Kroes. A successful bid seemed to have been agreed with United International Trust (UIT) acting through an intermediary, Stichting Particulier Fonds Greenrights. The bid was reported as accepted and industry “experts” quoted figures between $86 and $136 million. The EU is insisting on the sale as the state aid given to the yards gives them an unfair edge. Now the Polish Government stands accused of sabotaging the deal by favouring the UIT bid. The funds, which were due in August, apparently never arrived, no surprise given the parlous state of the market.

Meanwhile news from America where Seattle based Todd Pacific Shipyards have bid successfully to build two or three more ferries for the state ferry service. Todd are already building the first ferry and have reportedly tendered $ 4 million over estimate at $114 to build the second and third boats of the series. The tender for the fourth vessel is still open. Hardly surprising the Seattle ba