shipbuilding

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HHI sees Saudi Aramco MOU as a turning point

The MOU follows discussions on strategic collaboration that were initiated when Saudi Aramco’s Board of Directors visited HHI’s Ulsan, South Korea, complex in April 2015.

Mr. Chung, who represented HHI for all relations with Saudi Arabia and Saudi Aramco, led the efforts that culminated with a signing ceremony presided over by Saudi Aramco President and CEO Mr. Amin H. Nasser at Saudi Aramco’s Dhahran, Saudi Arabia, headquarters.

According to Mr. Chung, the partnership is “a great opportunity to enhance Korea’s shipbuilding and EPC businesses” and continues a contribution to the Kingdom by HHI that goes back to the 1970s when it was awarded a contract to undertake development of the Jubail port (King Fahd industrial port) project.

“This signing is significant as it provides the potential for the creation of another Jubail that creates tremendous growth opportunities for HHI,” said Mr. Chung.

Saudi Aramco has been looking to develop a yard at Ras Al-Khair, 60 km north of Jubail, in coordination with the National Shipping Company of Saudi Arabia (Bahri) and HHI as potential partners.

The yard would leverage the partners’ offshore business to accelerate localization efforts of Saudi Arabia’s young and promising maritime industry, and its associated supply chain. HHI’s role would include winning shipbuilding vessels while participating in construction and operation of the shipyard and gaining opportunities to provide various value added services.

The project would enable the partners to cater to growing Middle East vessel demand and to build vessel types that it is no longer profitable to build in Korean shipyards.

Also being eyed is a future engine building joint venture that would allow the HHI-developed HiMSEN engine to expand its share of both the marine and power plant sectors in the region.

Another strategic partnership under development relates to HHI’s Middle East EPC business, seen as the seed for a joint cooperation through which a regional EPC champion could be created.

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Vard: One new order, a lot more red ink

First the good news: It’s an order for an offshore vessel of undisclosed type or size, for an undisclosed owner, at an undisclosed price. Designed by Vard Design in Ålesund, Norway, the vessel’s hull will come from the Vard Braila shipyard in Romania, with outfitting and delivery scheduled from Vard Langsten in Norway in 2017.

Now to the mounting losses. Vard recorded a net loss of NOK 845 million ($1($98.4 million) and NOK 1.1 ($128 million) for 3Q2015 and 9M2015, against a loss of NOK 160 million ($18.6 million) and profit of NOK 30 million ($3.5 million) respectively in the corresponding 2014 periods. The third quarter loss attributable to equity holders came at NOK 486 million ($56.5 million), as compared to a loss of NOK 37 million ($3.4 million) in 3Q2014.

Over the first nine months of the year, cash holdings declined from NOK 2.0 billion ($232 million) to NOK 906 million ($105 million) as at 30 September 2015 on the back of capital-intensive projects requiring a significant amount of working capital, and the cash impact of losses in Brazil. However, cash holdings remained stable in the third quarter compared to the balance of NOK 904 million at the end of 2Q2015.

Although orders picked up in the third quarter, with four new vessel contracts secured, total order book value at September 30 was NOK 14.01 billion ($1.6 billion) — a 30% decrease from the third quarter 2014 figure.

Currently, Vard has an order book of 31 vessels, of which 18, or 58%, will be of its own design.

Vard is winning some work outside of its traditional North Sea market and in non-offshore related specialized vessels. Still, that’s not been enough to offset the impact of continuing offshore weakness in its European shipyards and of lower utilization and cost overruns at its Brazilian shipyards, where “additional loss provisions were required to account for unsatisfactory progress.”

“In particular,” says the company, “the scope and complexity of the series of LPG carriers under construction at [50.5% owned subsidiary] Vard Promar exceeds original assumptions, while the efficiency and operational stability at the new yard is still lower than anticipated.”

Downsizing continues at Vard’s Niterói Brazil yard in line with a declining workload.

Activity levels at Vard’s shipyards in Romania and Norway continue to decline on the back of a shortfall of sizeable new orders and postponement of deliveries in the current order book.

In Vard Tulcea, the larger of its two shipyards in Romania, a restructuring process is underway and a number of engineering resources have been subcontracted to Vard’s parent group Fincantieri in order to retain highly skilled staff in the organization. Vard Tulcea has also delivered first steel sections to Fincantieri cruise shipbuilding projects, and opportunities are being evaluated how the yard can carry out a larger share of such project.

In Norway, temporary layoffs are being imposed.

Operations and yard utilization at the Vietnam shipyard, Vard Vung Tau, are said to “remain robust.”

Vard says that work is underway on a comprehensive strategy overhaul and development of a new business plan which it will unveil when it releases its full year figures.

It says a key element of that plan will likely be a diversification of production, with synergies with the Fincantieri parent group expected to play a major role.

Vard says its “exposure to the Brazilian market is under review.”

DSME hit by second fatal fire within months

It is the second fatal blaze at the shipyard in just a few months and there appear to be close parallels in the two incidents.

Two people died in an August 24 fire onboard an LPG tanker under construction at the yard and, in that fire too, another seven were injured.

Today’s fire, like the earlier one, was reportedly aboard a gas carrier and in both cases sparks from a welder’s torch were initially identified as the likely cause.

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Falling freight rates hit Maersk Group profits

The Maersk Group delivered a profit of $778 million (compared with $1.5 billion in the third quarter of last year) negatively impacted by the lower oil price and lower average container freight rates, down 51% and 19% respectively compared to the same period last year. The return on invested capital (ROIC) was 7.6% (12.7%).

The underlying profit was $662 million ($1.3 billion) with lower profits in Maersk Line, Maersk Oil and APM Terminals and improved result for Maersk Drilling, while APM Shipping Services was on par with Q3 last year.
Group CEO Nils S. Andersen said the decline of nearly 50 percent  in underlying profit compared to last year was primarily due to container freight rates deteriorating to a historically low level, especially in the later part of Q3, and profits in Maersk Oil being impacted by the lower oil price.

“The expected underlying result of around $3.4 billion for 2015 reflects good performance in very challenging oil and container shipping markets, where the continuous actions taken in all our business units to reduce the cost base will enable us to maintain our ability to pursue the opportunities arising in our industries,” says Mr. Andersen.

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AEU’s Rob Stuardi appointed to key SCA committee

AEU is the program administrator for American Longshore Mutual Association (ALMA), a group mutual association which is authorized by the U.S. Department of Labor to provide USL&H coverage in all 50 states.

AEU is a member of the SCA based on its longstanding support of the U.S. shipbuilding and repair industry.

“This is a high visibility position in the industry and within the SCA where the Committee represents the 88 Industry Partner members of the SCA disseminating information about SCA activities to the Industry Partners, responding to their concerns, and representing them to the overall SCA Board of Directors,” said AEU’s Jack Martone, one of the founding members of the SCA Industry Partner’s Committee in 2012.

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Maersk Line to cut jobs, scale back shipbuilding plans

Those initiatives will see it reduce network capacity, shed “at least 4,000” jobs by the end of 2017 and cut back on the ambitious shipbuilding plans announced earlier. It will not exercise previously announced options for six 19,630 TEU vessels and two 3,600 TEU feeders and will postpone its decision on an optional eight 14,000 TEU vessels.

Maersk Line says that, in light of lower demand, these moves will still allow it to grow at least in line with the market to defend its market leading position.

Over the next two years, Maersk Line expects to lower the annual Sales, General & Administration (SG&A) cost run-rate by  $250 million with an impact of $150 million in 2016. SG&A savings will be derived from already initiated transformation projects and the standardization, automation and digitalization of processes.
 
“We are on a journey to transform Maersk Line. We will make the organization leaner and simpler. We want to improve our customer experience digitally and at the same time work as efficiently as possible,” says CEO Søren Skou.

Today, Maersk Line has 23,000 land based staff globally. Organizational transformation and on-going automation and digitalization will, it says, enable it to reduce the global organization by at least 4,000 positions by the end of 2017 with the aim of minimizing redundancies through managing natural attrition.

“We are fewer people today than a year ago. We will be fewer next year and the following year. These decisions are not taken lightly, but they are necessary steps to transform our industry,” says Mr. Skou.

As a response to the current market outlook, network capacity will be reduced in Q4 2015 and throughout 2016. As previously announced, the closure of four  services (ME5, AE9, AE3 and TA4) has already been initiated over the last two months and plans are in place to further cancel a total of 35 sailings in Q4.

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Crystal ups river cruise orders at Lloydwerft, buys Mozart

Crystal Cruises’ parent company, Genting Hong Kong, entered into an agreement to acquire the shipyard in September, investing EUR 17.5 million for 70% of the new shipbuilding business and a 50% ownership of the shipyard’s land.

The decision to double the number of river cruise vessel newbuilds comes just months after Crystal Cruises unveiled its intention to embark on what it calls the “most significant brand expansion in the luxury travel and hospitality history” with the addition of Crystal River Cruises, Crystal Yacht Cruises, Crystal Exclusive Class ocean vessels and Crystal Luxury Air.

President and CEO Edie Rodriguez reported today that in addition to adding two more river vessels at the Bremerhaven shipyard, responding to strong demand from travelers and agents for an earlier Crystal river experience, Crystal has also completed the purchase of the German built MS Mozart, the largest river cruise vessel in Europe.

Following an extensive drydocking to create the upscale Crystal experience on board, the revamped vessel will be renamed Crystal Mozart and start Danube River cruises in July next year.
 

“In response to travelers and travel agents’ enthusiasm for Crystal River Cruises, and through Crystal’s innovation, we are upping the ante once again, bringing ‘true luxury’ to the river cruise sector with the largest guest suites and public spaces, the highest crew-to-guest-ratio and Crystal’s award-winning service,” said Mr. Rodriguez. “Once the transformation of Crystal Mozart is completed, it will truly be the crown jewel of the European rivers.”

Crystal Mozart is designed to fit into the wider locks of the Danube River from Passau in Germany to Budapest in Hungary, and holds the record of being the largest river cruise vessel on European rivers, measuring 75.1 feet wide (22.9 meters), which is double the width of an average industry river boat. The 160-guest capacity Crystal Mozart has window suites of 203 square feet, deluxe suites of 215 square feet, a penthouse suite of 322 square feet and two, two-bedroom Crystal Suites of 860 square feet, the largest suite on any river vessels. Due to its impressive width and size, the vessel’s unique features will remain, such as the public area that spans a single level and yacht-like amenities including multiple dining rooms, a wraparound promenade, a luxurious spa and fitness center, an indoor pool, beauty salon, and library.

The four new all-suite luxury river yachts will debut in June and August 2017, boasting suites of 220 square feet, deluxe suites of 250 square feet, a penthouse suite of 500 square feet and a two-bedroom Crystal Suite of 750 square feet.

The new vessels will feature a Palm Court with dance floor and glass domed roof, a library, fitness center, spa, and sporting equipment such as electric assisted bicycles, kayaks, and jet skis.

Designed with the maximum size to fit into the locks of rivers and under bridges, two of the Crystal River Yachts will cruise the Rhine, Main and Danube rivers with 110 guests. The other two will each have an 84-guest capacity, one will be cruising the Seine River and the other the Garonne and Dordogne rivers as well as navigating through the Gironde Estuary.

Itineraries, fares and bookings for the four new vessels will be available on November 30, 2015 (Cyber Monday).

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Construction of new Shanghai Wartsila factory begins

 

After the ground breaking ceremony, CWEC signed strategic cooperation agreements with the Hudong Zhonghua and Shanghai Waigaoqia (SWS) shipyards. It also signed a Letter of Intent ]with SWS for the delivery in 2017 of Wärtsilä Auxpac 32 generating sets for three large container vessels being built at the shipyard.

The CWEC joint venture was established in July 2014 for the manufacture of medium and large bore, medium speed, diesel and dual-fuel Wärtsilä engines. The new factory will be the first in China capable of producing locally large bore medium speed diesel and dual-fuel engines. By being able to produce and deliver locally, the new joint venture will provide CSSC Group and other Chinese shipyards with closer access to the Wärtsilä range of engines with the benefits of faster delivery times and competitive pricing. Wärtsilä’s share of the joint venture is 49 percent.

Products to be manufactured at the new facility will include the Wärtsilä 26, Wärtsilä 32, Wärtsilä 34DF, and Wärtsilä 46F engines, the first of which are expected to be ready for delivery in 2016. The production capacity is planned at 180 engines per year.

“It is an honor and a privilege to celebrate this latest milestone in our joint venture journey. By combining the strengths of our two companies; CSSC’s strong capabilities as the number one ship builder in China and Wärtsilä’s industry leading technologies, we can together make an important difference in today’s challenging global marine market,” said Roger Holm, Senior Vice President, Engines, Wärtsilä Marine Solutions.
“

This is an important occasion for the shipping industry in China. The new factory will produce state-of-the-art marine engines that will serve our customers with value adding efficiencies. We are pleased to cooperate with Wärtsilä in this exciting joint venture,” said Wu Qiang, President of CSSC.

The CWEC joint venture will target the offshore and LNG markets in particular, both of which are growing significantly in China. It will also serve the large container vessel segment.

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