Norway:
Production records, but order worries

	The large offshore vessel “Edda Fjord” in the final stages of fitting out at Flekkefjord Slip & Maskinfabrik. PHOTO: DAG BAKKA JR

From years of bonanza the Norwegian shipbuilding sector is now bracing itself for meagre years ahead. Competition from shipbuilders with lower labour costs, a high NOK currency and a softening in demand in some key markets are the reasons for a gloomy outlook.
The situation is considered to be most difficult for the larger yards which rely on their own integrated steel-construction lines, which are largely barred from subcontracting hulls to East European builders. On the top of it, the offshore fabrication industry is also suffering under competition and fewer construction projects, and many fear that the entire maritime construction sector is looking towards down-scaling.
However, such collective sentiments of gloom and doom should not be allowed to prevail. True, labour costs are high and the high currency has been damaging, but there are still gleams of hope.
It should be remembered that shipbuilding is closely integrated in a wider maritime technology industry which includes ship design, equipment, IT and a wide range of subcontractors, with close relations to the customers and users. In the course of the 1990s, most yards successfully left the steelwork to low-cost subcontractors abroard and at the same time increased the capacity and production value from less than NOK 9 to some 11–12 billion (from Euro 1.2 to 1.5 billion) per year.
It is apparent though, that the capacity has become too large. Around 1997 new shipbuilders entered the scene and tendered for contracts based on little more than steel hulls from Eastern Europe and a band of local subcontractors. As the contracting volume deflates the yards with the most efficient organization, equipment, financial position and skilled staff will survive

All-time high production
With increasing production capacity the new contracts signed in 2001 and 2002 were barely half of what was needed to maintain the orderbooks. And as orders came trickling, most yards were fully employed and completed no less than 80 vessels during the year, with a production value of NOK 14.4 billion (Euro 1.85 billion). This was, in fact, an all-time high, but largely due to the late delivery of The World which alone contributed with almost NOK 2 billion. The output was also boosted by expensive passenger vessels like “Midnatsol” and “Finnmarken”, the tankers “Bow Chain” and “Carlos Fischer” and a large group of advanced offshore vessels. The production reflects the four main markets: offshore vessels, fishing, passenger including fast ferries and specialized smaller ships.
The new orders landed amounted to no more than NOK 5.8 billion, again distributed across the traditional segments. The slowdown has been attributed to a declining interest in offshore vessels and uncompetitive conditions for chemical tankers, but a heartening number of large fishing vessels for export. This left a higher share of export orders than before, reaching 39 per cent of the order value, against 24 per cent of the deliveries.
This of course depends on whether you classify The World as Norwegian or not.

Outsourcing
Compared to other shipbuilding nations in Europe, it could be argued that Norway has managed to retain most of its industry by seeking niches and by a high degree of outsourcing. Today practically all the steel hulls are subcontracted to Poland, Lithuania, Latvia, Russia, Ukraine, Romania, Bulgaria and Turkey. The hulls are towed home complete with interior elements and painting. Also yards like Ulstein and SIMEK which have their own steel facilities, are subcontracting steel sections brought home as project cargo.
Aker Brattvaag, a part of Aker Kvaerner Yards, has followed a clear strategy to build an integrated organization with a presence in important markets.
This includes two outfitting yards in Norway, Brattvaag and Søviknes, the hull construction yard Aker Tulcea in Romania and Aker Promar in Rio de Janeiro, building offshore vessels for the South American market. Other Norwegian companies have acquired shipyards in Romania, as have the Dutch. The reintroduction of a 6 per cent shipbuilding subsidy for product and chemical tankers from 15. March may help Norwegian yards to win new contracts, also helped by the declining value of the NOK. In particular, the Kleven Florø shipyard – a specialist stainless steel shipbuilder – is pinning its hopes on this.
With the order backlog halved in a year, the Norwegian shipbuilding industry will have to adapt to more competitive market, focusing on its core markets and seek to benefit from the strong maritime technology community.

//Dag Bakka Jr