by Tom Todd
In July, Germany's Howaldtswerke Deutsche Werft (HDW) in Kiel added a $252 million contract for four Superfast ferries for a Greek customer to an already bulging, and varied, order book. The contract was important for three reasons.
German shipyards have done their homework, says Herbert von Nitzsch, chairman of Blohm + Voss in Hamburg. Von Nitzsch, long a proponent of niche newbuilding, adds that the the German industry is now concentrating on areas which allow its advantages to be fully exploited. These include engineering expertise, a well-established supplier infrastructure and capable research and development facilities.
Some impressive figures lend weight to his argument.
In the first five months of 1998, German yards took in orders worth around $3.5 billion--three times higher than in the same period last year.
Significantly, half were for passenger ships, among them cruise ships from Meyer Werft, HDW and Lloyd Werft.
B+V received an order for two fast monohull cruise ships. This first order for an innovative new design from the yard has meant the return of passenger ship newbuilding to Hamburg after an absence of more than three decades.
Being built for deliveries in 2000 and 2001 to Royal Olympic Cruise Lines of Greece, the new 800-passenger ships are reportedly worth some $336 million. Von Nitzsch says the yard's strategic aim now is to specialize in ships with a high technological content.
The order has raised spirits at B+V after a period of painful restructuring.
It now has orders worth around $1.5 billion and good prospects in special ship, naval and mega yacht newbuilding, says Von Nitzsch.
In Kiel, the Superfast order is especially gratifying to Jürgen Gollenbeck, who heads the HDW board, for more personal reasons. He headed Schichau Seebeckwerft when it completed the first two Superfast ships in 1995. Schichau was a Vulkan Group subsidiary and when the group collapsed in 1996, the follow-up orders went to Finland. Now Gollenbeck can say with justifiable pride:"I succeeded in winning an owner back." The customer is new to HDW and so is the product.
Meanwhile, Gollenbeck also expects HDW and Knut Kloster Jr.'s ResidenSea to close financing negotiations for the planned 86,000 gt condo cruise ship, The World of ResidenSea, by the end of September. That will tie in nicely with the completion, by December, of innovative feederships for Norasia and with preparations for construction of two of the world's biggest reefer-containerships for Dole Fresh Fruit.
Elsewhere in the passenger ship sector Flender Werft in Lübeck has a $112 million order for three RO/RO ships from Holland's Wagenborg on its books. And in Bremerhaven Lloyd Werft is busy completing the 2,000 passenger Norwegian Sky for Norwegian Cruise Lines--a job worth DM 500 million.
It is at Meyer Werft in Papenburg however where the records are really being broken. It now has contracts in hand for no fewer than seven cruise liners worth more than DM 4 billion--among them new orders for two 85,000 gt liners for Royal Caribbean and two 75,000 gt ships for Malaysia's Star Cruises.
German shipyards exploit tanker niche
Being built for delivery by spring next year at tanker specialist Lindenau Schiffswerft in Kiel are two sophisticated 13,000 dwt, tankers for service with China's Chiangjiang National Shipping Company. The ships--examples of Lindenau's Class 2000 tanker class--are 145.6 m long and 19.6 m wide.
Lindenau is also building another of the 14,750cu.m vessels--an oil and chemical tanker--for regular German customer Carl Büttner for delivery in November next year. It is a sister ship to the Hornisse, recently delivered to the same owner. The ships are to MARPOL 25A standard and are powered by MaK Type 9M32 Diesels developing 15.2 knots.
Earlier this year, Lindenau completed another sophisticated pair of 15,750 dwt oil and chemical tankers for Italy's Marichem Europe. The Mariella Amoretti was handed over in June. It is 132 m long, 24 m wide with 16 tanks for a spread of products. It follows the Rina Amoretti, which was 12 m shorter and was delivered in August last year.
The orders are part of a trend that sees a modest revival in tanker newbuilding for home and foreign owners at specialist shipyards in eastern and western Germany.
In the former GDR, construction began in June at Aker-MTW in Wismar on the third of five ice-breaking Arctic Class tankers for Russia. They are for deliveries in March, May and July next year.
The second of the series, Volvograd, was delivered to Lukoil ArcticServices in February. The first, Perm, was handed over December.
These first two ships were 15,890 dwt, 17,200 cu.m units The final three are slightly smaller in capacity (15,580 dwt, 17,100 cu.m) and are capable of carrying chemicals as well as products.
All are tough but sophisticated 145.7 m x 22.5 m ships especially designed for service in northern seas. Their stems and shoulders allow continuous passage at two knots through one-year old ice and snow.
Also on order at Aker-MTW are four rather larger tankers for Rigel Schiffahrt of Bremen. For completion next year and in early 2000, they are 21,500 dwt chemical oil tankers. There is an option for a fifth for Rigel, which has bought 12 COT tankers of various sizes from the yard since 1992.
Meanwhile, pursuing a trend to cut costs through joint production, Meyer Werft in Papenburg and Thyssen Nordseewerke (TNSW) in Emden are cooperating on two 12,400 cu.m gas tankers for Norway's Skibs A/S Solvang. The order was won by Meyer last year against stiff competition from Asia. Meyer, though best known for its cruise ships, has built 46 tankers since 1963.
The hull for the first of the two 17 knot Solvang tankers, Clipper Viking, was completed at TNSW in July. Fitted with gas tanks built by Meyer, it was towed upriver to Papenburg for installation of cargo handling and gas plant prior to completion late year. The second ship is for delivery mid 1999.
Also involved in the construction are two other German facilities. Deckhouses are from Meyer subsidiary Macor Neptun in Rostock and pump houses are from Schichau Seebeckwerft in Bremerhaven.
Bernard Meyer describes the co-operation as excellent. It is, he says, an example of how yards can work together rather than against each other.
When the yard took the order Meyer said co-operative building was the only way that expensive German yards could beat Asian competition. [Meyer, who is chairman of the Committee of EU Shipbuilders Associations, also sees the potential for cooperation with other European yards.]
INDUSTRY RECOVERS FROM VULKAN FIASCO
The good news, then, is that two and a half years after its image was seriously dented by the Vulkan fiasco, German shipbuilding has pulled itself back onto its feet remarkably well.
All round, significant gains in productivity, cuts in costs and expanded co-operation have given many yards new life and provided the basis for survival.
Professor Manfred Zachcial of the respected Institute of Shipping Economics and Logistics in Bremen is bold enough to assert that Germany's protracted shipbuilding crisis is coming to an end, after the shedding of 13,000 jobs in about three years.
Zachcial concedes that further closures and job losses are still possible but says that, generally, the trough in the industry, which delivered 83 ships worth some $2.8 billion last year, will not get any deeper. Jobs are unlikely to drop below about 20,000, he adds. Zachcial also notes the strength of an allied equipment supply industry that provides a further 70,000 jobs and has annual sales of around $9 billion.
Nonetheless, having achieved all this, German shipbuilding is now being battered by the effects of economic downturn in Asia and particularly by further cuts in Korean yard prices.
The German shipbuilding association, VSM, warned earlier this year that industry survival was in doubt if political action were not taken to end catastrophic Korean price cutting.
VSM managing director Volkhard Meier now reports a 20-30% difference in prices between German and Korean yards.
German yard managers certainly acknowledge the boom in specialized sectors. But they confess to grave concern about the effects of Asia on conventional sectors - especially containership newbuilding where Germany once had a commanding lead.
In recent years, German competitiveness in box ship construction has been honed. Ever-keener prices have been achieved through workforce attrition. Productivity has been vastly improved productivity. Yards have cooperated nationally and internationally and have added imaginative costing and financing systems to the industry's legendary quality and deadline reliability.
As a result, most major yards are still turning out containerships. Examples include HDW's 1,300 TEU feederships for Norasia, Flender's 2,100 TEU ships for Klaus-Peter Offen, boxships for ship investor Gebab at Thyssen Nordseewerke (TNSW) in Emden, and new series of ships from MTW in Wismar, Volkswerft in Stralsund and KWW in Warnemünde.
But all these ships were ordered before the Asian crisis. Now, virtually overnight, the latest Korean price cuts have wiped out many of the German cost and price gains of the past few years--gains that were bringing German prices closer to competitive world market levels.
Uwe Otto, sales and marketing director of Flensburger Schiffbau-Gesellschaft (FSG), says the IMF bale-out of the Korean economy has negated all the gains made by German yards. The yard's general managing director, Fred Garbe says FSG had managed to achieve German standards at prices that covered costs and that nearly matched Asian pricesóbut that was before the crisis.
In many cases German yards have boosted productivity by as much as 30-40% in the past few years. This has been achieved with the help of hefty investments in facilities and technology. TNSW has invested about $28 million in five years and Flender $33.6 million in eight years. FSG has plowed $40 million in modernization and HDW says it has reduced annual costs by $17-28 million.
HDW's Gollenbeck says the Asian crisis has affected the yardís business directly, by halting order negotiations, and that currency disruptions have indirectly affected HDWís staple area - boxships.
B+V's von Nitzsch warns that German productivity gains will not be enough to guarantee industry survival if the European Union and the OECD are unable to prevent further competitive distortions by Korea.
Von Nitzsch says that German yards cannot compete against national treasuries and that if the current situation does not change, it will lead to considerable negative effects... and not only in the German shipbuilding industry.
Flender board member Martin Krause also expects price pressure and competition to get tougher if Korean shipyard expansion is not halted. And TNSW board chairman Heinz Ratzmann says that, despite all the gains made since the Vulkan debacle, yardsí fitness for survival must be seen against a backdrop of existing global over capacity. It will in the end. The issue, he says, is ìa political question.î
The large yards in the former German Democratic Republic--MTW Wismar, Volkswerft Stralsund and Kvaerner Warnow Werft in Warnemünde--now have it easier than their counterparts in the west.
KWW, acquired by Kvaerner in 1992, and MTW and Volkswerft, taken over this year by Norway's Aker and Denmark's A.P.Møller, now have solid, deep-pocketed groups behind them. Nor, as one west German manager points out, do they have to drag around with them the burden of capital costs or repay their modernization investment costs of $280-340 million.
Nonetheless Volkswerft managing director Werner Lundt speaks for east and west alike when he says, the turbulences in Asia are worrying for every European shipbuilder. "It is very difficult for us to do anything to counteract Won devaluations or other state measures," he says, adding,"we look forward to a time when there is fair competition--the result of improved productivity and modern manufacturing technology."
Cooperation, at home and on a European level, is one way German yards now clearly hope to tackle the latest problems. The willingness and climate for co-operative ventures has increased considerably in the last few years, says Ratzmann at TNSW. One reason is that yards have become relatively small. That means that no single yard can handle a large volume order.
Ratzmann points to the current co-operation between KWW and MTW on a series of 5,000 TEU boxships for P&O Nedlloyd and also cites TNSW newbuilding co-operation with FSG, Flender and sister yard Blohm+Voss. Cooperation, says Ratzmann "makes a lot of sense."
HDW's Gollenbeck agrees. "Co-operation with other German shipyards remains important to us--particularly with regard to balancing-out capacities," he says. A small example of that is a pipe forming co-operation with FSG. HDW has capacity. "We need it," declares FSGís Otto. Gollenbeck says HDW is also interested in expanding co-operation on the European level. But he sees"no basis presently" for co-operation with Asian yards. Yet, just a few years ago, HDW cooperated with Koreaís Daewoo to cut costs on a series of boxship newbuildings for APL.
The VSM's Volkhard Meier believes further cooperation within Germany is round the corner. He notes talks between Thyssen and Preussag on possible yard mergers, singles out the creation of the small ship cooperative grouping MSG and welcomes Scandinavian firms' co-operative involvement in east Germany. "I expect further co-operation, which could take many different forms," he predicts.
REPAIR YARDS BUSY
In North Germany, there appears to be somewhat of a renaissance in the repair business of Blohm + Voss and Lloyd Werft.
Contracts to overhaul eight big boxships for Danish owner Mærsk and to repair and upgrade five container vessels for Sea-Land have kept Hamburg's Blohm + Voss Repair busy this year.
The order situation has been good in the past 12 months. However, the competitive situation in repair in Europe, remains difficult, managing director Helmut Nadler told Marine Log.
Earlier in the year the yard drydocked the 96,314 dwt Norwegian tanker Fosna for routine repairs and, over two and a half months, prepared the103,000 dwt Norwegian shuttle tanker Berge Hugin for conversion into an FSPO vessel in the U.K.
B+V's big reputation for repair punctuality however is increasingly more attractive to tight-schedule boxship operators. That has been reflected in the repairs and minor conversions on Sea-Land's 58,869 dwt, 4,614 TEU Sea-Land Quality, Newark Bay, Sea-Land Atlantic, Sea-Land Integrity and OOCL Inspiration, all carried out at 12 day intervals up to mid July.
The work included hatch cover conversion and pipe work as part of upgraded fuel and ballast tank changes as well as routine painting, maintenance and voyage repairs. A few years ago B+V converted three other Sea-Land ships in the same seriesóshortening them and building new bow sections.
As the Sea-Land contract was being wrapped up, July also saw the drydocking of the 20,606 gt German cruise ship Astor, for removal and overhaul of her B+V-built fin stabilizers, and repairs to the much smaller specialist icebreaker tug and supply vessel Arctic Kalvik. It also saw the drydocking and overhaul of the first of MÊrskís new 6,000 TEU class vessels Regina Mærsk. That 82,135 dwt giant was followed in by the first of seven further Mærsk 4,200 TEU M Class boxships for overhaul up to October. Those 23 knot vessels, in Europe-America-Far East service out of Bremerhaven, are 294 m long and of 60,639 dwt. The first in for the 12-14 day spruce-up was Marchen Mærsk. Mæsk Deutschland said a competitive bid from B + V Repair had clinched the contract but Helmut Nadler said deadline reliability, quality and available capacity had been the main factors.
Conversion business has boomed this year at Lloyd Werft in Bremerhaven and even bigger and better work could lie ahead. The yard is beginning to look more like it did in the days when it was converting giants like the QE2 and Norway.
In the Spring it signed a letter of intent with Norwegian Cruise Lines covering the completion and delivery of a 76,000 gt cruise ship and the completion of three sister ships up to 2003. As we went to press, the two sides were still discussing that project.
If confirmed, it would be worth a total $1.35 billion and would, says joint managing director Werner Lüken, involve bringing in hulls made elsewhere for completion in Bremerhaven.
Lloyd Werft is already completing the cruise ship Norwegian Sky for delivery to the same owner next year--a contract worth $280 million. The 2,000 passenger vessel is being completed on an hull built by Bremer Vulkan and Schichau Seebeckwerft (SSW) and originally intended for a Costa Crociere newbuilding.
The job is not repair or conversion. But neither is it newbuilding, says Lüken. "We are not a newbuilding yard and we do not want to become one," he stresses. "We emphasize that."
Already this year the yard has completed the lengthening by about 40 m of the NCL cruise ships Norwegian Wind and Norwegian Dream. The work was worth about $107 million. A third ship, Norwegian Majesty, is due in for lengthening by about 30 m early next year at a contract price of about $54 million.
NCL cruise ships at Lloyd Werft
"We are quite full and have orders through into the year 2000, which is unusual for a repair yard where business is, for the main, short-term," says Lüken. "Our repair business is running without restriction, parallel to the big conversion projects," he adds.
Lüken says "we can sleep better at nights now." That ís not only because of the healthy orderbook but because the yard has gotten out from under the mess that followed the collapse of its former parent Vulkan group.
"We can, at last, run this yard the way we have wanted to for decades," says Lüken. These days Lloyd Werft is majority (70%) owned by Natwest Equity Partners of the U.K.
Natwest, Lüken says,"leaves us a lot of freedom to conduct our daily business as we see fit. We have a good relationship. The long search for a partner has been worth it and we are very pleased with the one we have found."
Lüken says last year, the first year after Vulkan's collapse, was "positive and it will be the same this year."
