Shipbuilding in Norway:
The year after

A slow income of orders but otherwise a healthy backlog sums up the position for the Norwegian shipbuilders. Despite the hangover from the 2000 order frenzy, 2001 performed much as, or perhaps better than expected after the termination of the shipbuilding subsidies.

The new orders booked during 2001 amounted to NOK 6.5 million, which is barely 2/3 of the annual production volume. However, the year-end order stock of NOK 26.6 million will keep most shipyards busy well into 2003.
The position moreover underlines the industry’s dependence on the offshore element, with 48 per cent of the order value tied up to supply and support vessels. In addition the two passenger ships for ResidenSea alone make out a 20 per cent share, and partly thanks to these the export share comes out at 46 per cent, which is rather more than usual.
Even though the merger of Aker and Kværner has brought about Europe’s largest shipbuilding group, effective from March 2002, Norway still has a rather fragmented yard structure with some 50 yards dispersed along the coast. This is mainly the blessing of a strong maritime cluster, the combination of a good home market with technological strength and flexible organisation. Add to this a large ships’ equipment industry and the close – mostly personal – relations between builder and client which banks for the functionality of the products.
For this reason the Norwegian shipbuilding industry has been allowed to continue much as before with its fragmented structure, at a time when most smaller yards have been forced out of business elsewhere in Europe.
There are several contributing factors; such as a joint marketing organisation – Norwegian Shipbuilders – and, above all, the flexible organisation of the yards with a core staff and the availability of a large corps of specialist subcontractors. For such a type of operation, it was a natural step to subcontract hulls and steelwork to shipyards in Eastern Europe.
Today, the majority of the orders are based on steelwork from Poland, the Baltic countries, Russia, Ukraine, Rumania, Bulgaria and lately also Turkey.
The total employment with Norwegian shipyards stands at some 8,000, with another 8,000 on call as specialist subcontractors, in addition to 10,000 employed in the equipment manufacturing sector.

Slow restructuring
The demise of the Kvaerner shipbuilding group, whose Norwegian yards were sold at bargain prices in 1999/2000, just preceded the opposite strategy within Aker-RGI where the shipyards have been brought together in Aker Yards. A new organisation was set up last year under Leif-Arne Langøy as CEO, coming from the Brattvaag shipyard, and steps taken to achieve synergies in purchasing and marketing. With Aker Yards, ten shipyards in Norway and abroard were brought together under one corporate leadership in Oslo, but leaving out the offshore yards in Aker Maritime.
The process has recently been taken a step further with the remaining Kvaerner yards in Finland, Germany and USA merged into Aker Kvaerner Yards – Europe’s largest shipbuilder.
The Brattvaag shipyard, located in a village north of Ålesund, has seen a remarkable development over the last five years, growing from one yard to a small group within the Aker Yards. The process started by taking over the bankrupt Søviknes yard, then by the acquision of Tulcea in Rumania in 2000 and the Promar shipyard in Brazil last year.
Kleven Maritime was established in 2001 as a joint corporate and marketing organization for the Kleven yards in Ulsteinvik and Florø, as well as Myklebust mek Verksted, with Steinar Sivertsen Kulen (formerly Ulstein) as CEO. This group includes Kleven Florø which is capable of building vessels up to 40,000 tdw, but otherwise the main focus is on smaller vessels. Most of the vessels delivered by Norwegian shipyards are based on hulls subcontracted from low-cost countries. The shipbroker who pioneered the relationship with Rumanian shipyards in the early 1990s, Knut Flølo of Scandinor, took a 70 per cent stake in the Braila shipyard two years ago, as the second Norwegian investment in Rumanian yards.
Apart from complete hulls, some shipyards also subcontract modules and sections to Baltic suppliers. But there are those who give up. A traditional yard like Hellesøy bowed out a few years back, now Umoe Sterkoder in Kristiansund will cease shipbuilding later this year and turn its attention to offshore fabrication. But others have been reactivated, like Slipen at Sandnessjøen which went bankrupt in 1999 and resumed shipbuilding last year.

Core markets remain
Offshore has become the prime market for Norwegian shipbuilding and maritime technology.
Of the new orders booked last year, supply and support vessels account for 69 per cent of the order value – including declared options – against 47 per cent of the deliveries. In addition, offshore vessels are being built to Norwegian design around the world, something which gives a significant market share.
Fishing vessels used to be another traditional speciality, with a strong home market as well as close customers in Iceland, the Faroes, Scotland, Ireland and Canada. This category accounted for 20 per cent of the delivery value last year.
Passenger vessels used to be the third market sector and still command a high share of the order value – 31 per cent – due to three new Coastal Express vessels and the two ResidenSea ships under construction. Besides there are some car ferries for domestic services and a handful of smaller high-speed vessels.
Norwegian shipyards have remained competitive for smaller and specialized vessels, but are sharing the fate of their European colleagues for larger. Kleven Florø is undoubtedly the world’s leading builder of stainless steel chemical carriers after a succession of vessels since the 1970’s.
The customers will get quality, but at prices which may be severely undercut by Korean and Chinese yards. This has led the Florø yard to subcontract the hulls for two juice tankers to a Rumanian yard as the first instance of building stainless steel tankers abroad.
Compared to most other shipbuilding countries. Norway has succeeded rather well in protecting and developing its core markets.
This has been achieved largely by concentrating on the markets with a strong domestic presence and seeking cost-cuts by subcontracting. So far the fragmented infrastructure has proved competitive, although there is clearly a trend for consolidation. This may not necessarily be giants like Aker Kvaerner Yards, but rather structures like Kleven Maritime or Havyards which may offer synergies in procurement, marketing and finance.
Having lost domestic orders to shipbuilders in Poland and Spain, the Norwegian shipyards will need to cooperate closer to protect its markets.

//Dag Bakka Jr

 

Back to SSG 4, April 5